Potential signal:
- The British pound breaking above the 1.3650 level is a very strong sign, and I would be a buyer.
- I would have a stop loss of 1.3550, aiming for the 1.3925 level.
The British pound initially tried to rally during the Tuesday, but we have seen a certain amount of resistance near the 1.36 level to turn things around and send the British pound lower. That being said, this is the 2nd day in a row we have seen a lot of negativity, at least after an initial try to run higher. If we pull back from here, and I think we very well could, I’d be watching the 1.34 level, because it is an area that’s been important multiple times in the past and of course you need to pay close attention to that previous resistance.
Technical Analysis
The technical analysis for this pair is obviously very bullish as of late, but when you look at longer-term charts, we are in an area that has faced quite a bit of trouble, and therefore it will be interesting to see if we can clear that 1.3650 level, because that is an important figure from a longer-term charts. If we can break above there, then the market could go looking to the 1.40 level, but I think we need some type of catalyst to make that happen. On a pullback, the 1.34 level should be supported, but if it does not offer enough support to keep the market somewhat afloat, then we could drop all the way down to the 1.32 level, where the 50 Day EMA currently resides. This obviously is a technical indicator that a lot of people will watch to determine the overall trend.
On the other hand, if we do break above the 1.3650 level, the market is likely to see this pair take off toward the 1.40 level, but I do recognize that we are a little stretched at the moment, so a pullback might actually help the bullish traders as well. Ultimately, I do think that you continue to see a lot of noise, but the British pound is a little bit different than many other currencies, due to the fact that the United Kingdom and the United States have a trade signed.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.