- The British Pound pulled back just a bit during the early hours on Tuesday, reaching down to the 50-day EMA before turning around.
- This of course is a bullish sign, and it is a repeat of what we had seen during the Monday session.
- What I think things are going to focus on now is going to be the idea that the Bank of England has an interest rate decision on Thursday, so I do anticipate that we will make a move sooner or later.
Looking at the technical analysis, I would say at this point in time, you have to assume that the 50 day EMA continues to offer support, but clearly the 1.2800 level above is a significant resistance barrier. I think we bounce around in that area for the time being, but I am also prepared to look at the other side of the trade.
The Other Side of the Trade
The other side of the trade would be breaking down below the 1.2650 level, which could open up a move down to the 200 day EMA, possibly even as low as the 1.2500 level over time. Keep in mind that a lot of traders are out there closely watching the Federal Reserve and it continues to be a central bank that a lot of people are flummoxed over as they may or may not cut by the end of the year.
As things stand right now, we just don't know, but a lot of people are starting to bank on the idea of one interest rate cut. Thursday should tell the story in this market, but clearly in the short term, we have a fairly well-defined trend. Because of this, I think traders are likely to continue to push and pull this market back and forth, as we try to sort out if and when we finally break out. I suspect that we are likely to continue to see a lot of noise until we get through the Bank of England announcement, when I would anticipate seeing a bit more follow through on whatever happens after the meeting.
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