- The British pound has gone back and forth during the trading session here on Monday as we continue to hover around the 50 day EMA.
- The 50 day EMA is an indicator of that has multiple times been important as both support and resistance in this pair.
- I would expect that to continue to be the case. It’s interesting that we’re forming a shooting star ahead of CPI, the consumer price index coming out on Tuesday.
Perhaps the market is a bit worried that inflation in the United States may be sticky. If it is, that could put downward pressure on this market, perhaps sending the British pound down to the 1.3250 level, an area that has been important more than once in this pair.
Alternatively
On the other hand, if we break above the top of the candlestick and CPI comes out cooler than anticipated, maybe traders will be looking for a move to the 1.3550 level. think all things being equal, this is a market that we need to be very cautious with. But I would point out that in general, the market will continue to see a lot of volatility.
If you remember the British pound for quite some time had outperformed other currencies against the U.S. dollar, even when it was falling. So, I think if this market starts to fall apart, that’s going to be a very bad sign for other currencies against the U.S. Ultimately, if we do rally from here, then I think the 1.3550 level is going to be very difficult to overcome. But if we can get above the 1.36 level then we could go much higher. All things being equal though, it is worth noting that the US dollar is at least starting to fight back.
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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.