- The GBP/USD currency pair has rallied significantly during trading on Monday, reaching the 50-Day EMA, showing an attempt to break out to the upside.
- However, we have pulled back from there to show signs of exhaustion, and therefore I think we may start to see the British pound pulled back a bit.
- I don’t necessarily think that we are going to see it melt down, but a little bit of hesitation and exhaustion would make quite a bit of sense.
Market Memory Coming Into Scene
Not only is the 50-Day EMA in that neighborhood, there’s also the 1.15 level that could offer some resistance as well, as it is a large, round, psychologically significant figure, in an area that previously had been supported. “Market memory” does make a certain amount of sense, as it had been important previously, so there’s no reason to think that wouldn’t be the case on the way back up.
The 50-Day EMA has been somewhat reliable as far as resistance is concerned, so I think it does make a certain medicines that we pay close attention to it. If we were to break down below the bottom of the candlestick for the trading session on Monday, then it opens up the possibility of a return to the 1.10 level underneath. That is a large, round, psychologically significant figure, and it will attract a lot of attention via headlines and of course the fact that we had bounced from there previously.
Breaking down below the bottom of the most recent pullback makes for a run lower, perhaps down to the 1.05 level underneath. The 1.05 level is where we had seen a major bounce from, and one is the most recent loan. If we were to break down below there, then it opens up the possibility of a move down to the parity level, which obviously would attract a ton of headlines. On the other hand, if we were to break above the 1.16 level, we might have a recovery toward the 200-Day EMA, which is closer to the 1.22 level. Ultimately, I still like fading rallies, as the US dollar is by far the strongest major currency out there. I don’t think that the Federal Reserve is anywhere near pivoting, and as long as that’s the case we will see the US dollar rally as a result.
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