Without a doubt, one of the most reliable trades has been shorting the British pound for some time. However, we are starting to see a bit of a difference in attitude, as we rallied a bit during the week. The 1.25 level underneath is massive support, and we are continuing to dance around the 61.8% Fibonacci retracement level, an area that should always catch your attention when it comes to technical trading.
With all that being said, the Federal Reserve has changed its tune as to whether or not monetary policy will be tight or loose. I suspect we are starting to see the US dollar rollover in general, and that of course will influence this market as well. The British pound could be a beneficiary, as we have seen so much in the way of negative pressure. Quite frankly, there’s nobody left to sell, and now it looks as if the Federal Reserve may be stepping away from its hiding policy. If that’s the case, this pair is probably grossly oversold.
Beyond that, historically speaking its oversold as well and I believe that the only thing keeping it down now is the Brexit. Ultimately though, we already know about the Brexit and the chaos it can cause. We have not factored or priced in an extraordinarily loose Federal Reserve.
At this point, it’s very likely that the market will go looking towards 1.30 level above. That’s an area that features the 50 week EMA, and of course the round figure. That is also where we had broken down significantly a month ago, and we have yet to retest that area. Can we break above there? I believe so, but I also think that it’s going to take a lot more work that will to get there. If we do break above the 1.30 level is possible we could go as high as the 1.33 handle. Longer-term “buy-and-hold traders” are certainly picking up cheap British pounds.
With all that being said, the Federal Reserve has changed its tune as to whether or not monetary policy will be tight or loose. I suspect we are starting to see the US dollar rollover in general, and that of course will influence this market as well. The British pound could be a beneficiary, as we have seen so much in the way of negative pressure. Quite frankly, there’s nobody left to sell, and now it looks as if the Federal Reserve may be stepping away from its hiding policy. If that’s the case, this pair is probably grossly oversold.
Beyond that, historically speaking its oversold as well and I believe that the only thing keeping it down now is the Brexit. Ultimately though, we already know about the Brexit and the chaos it can cause. We have not factored or priced in an extraordinarily loose Federal Reserve.
At this point, it’s very likely that the market will go looking towards 1.30 level above. That’s an area that features the 50 week EMA, and of course the round figure. That is also where we had broken down significantly a month ago, and we have yet to retest that area. Can we break above there? I believe so, but I also think that it’s going to take a lot more work that will to get there. If we do break above the 1.30 level is possible we could go as high as the 1.33 handle. Longer-term “buy-and-hold traders” are certainly picking up cheap British pounds.