The British pound has pulled back a bit during the trading session on Monday as there was a flight to safety in the Forex markets, lifting the US dollar against most currencies. Beyond that though, the British pound had been a bit overextended as we reached towards the psychologically important 1.25 level. The market had been parabolic for a while and quite frankly these types of moves eventually run out of inertia. Essentially, the drone attacks in Saudi Arabia were probably more of an excuse than anything else to start selling again.
That being said, Brexit fears continue and clarity is something that the market simply does not have. With that in mind it’s likely that we will see headlines that cause major issues from time to time. Beyond that, the 38.2% Fibonacci retracement level is sitting right at the 1.25 handle, so with that in mind it’s very likely that we will continue to see a lot of volatility. From here, one would anticipate that the market could go down to the 1.23 level where the 50 day EMA is, and if we can break below there it’s very likely that we could even go down to the 1.20 level after that. Ultimately, this is a market that has been in a downtrend for some time, and quite frankly there’s nothing to suggest that we are ready to break it.
Having said that, if we were breaking above the 200 day EMA above, then it would be by a definition a trend break, but at this point it is hovering right around the 50% Fibonacci retracement level so that would be even more disruptive and unlikely to happen. At this point, the 1.25 level looks to offer a bit of a short-term “ceiling”, and as long as we can stay below there shorting is probably the best short-term opportunity.
That being said, Brexit fears continue and clarity is something that the market simply does not have. With that in mind it’s likely that we will see headlines that cause major issues from time to time. Beyond that, the 38.2% Fibonacci retracement level is sitting right at the 1.25 handle, so with that in mind it’s very likely that we will continue to see a lot of volatility. From here, one would anticipate that the market could go down to the 1.23 level where the 50 day EMA is, and if we can break below there it’s very likely that we could even go down to the 1.20 level after that. Ultimately, this is a market that has been in a downtrend for some time, and quite frankly there’s nothing to suggest that we are ready to break it.
Having said that, if we were breaking above the 200 day EMA above, then it would be by a definition a trend break, but at this point it is hovering right around the 50% Fibonacci retracement level so that would be even more disruptive and unlikely to happen. At this point, the 1.25 level looks to offer a bit of a short-term “ceiling”, and as long as we can stay below there shorting is probably the best short-term opportunity.