The British pound initially tried to rally during the trading session on Monday but gave back the gains at the 50 day EMA yet again. Ultimately, the market continues to see a lot of noisy behavior in this general vicinity, as we continue to consolidate. The British pound of course has been choppy as of late, and therefore it is likely that the market will continue to see a bit of hesitation to go higher, but the shape of the candlestick of course is a little bit of a shooting star, so that suggests that the market is ripe for a little bit of a pullback.
The 1.38 level underneath has been supportive over the last several days, and if we break down below that level it is likely that we go looking towards 1.37 handle. The 1.37 handle has been supportive more than once, and of course the 200 day EMA currently sits at the same level. If we were to break down below there, then it is likely that the British pound will finally go looking towards 1.35 handle. Ultimately, the analysis is very similar to the analysis I have given over the last several days, so I think it is only a matter of time before we would see some type of squeeze. The market currently looks at the 50 day EMA as significant resistance but breaking above there we could go looking towards the 1.40 handle. The 1.40 handle is of course a large, round, psychologically significant figure, and of course will attract a lot of attention.
The 1.40 handle is strong resistance out as we have seen multiple times, and therefore I think it will be difficult to break this market to the upside. On the other hand, breaking down below the 1.35 handle opens up a flood of selling. The US dollar strengthening like that would more than likely show up everywhere, so would not just be this market, it would be multiple other currency markets and perhaps even precious metals markets depending on what we are trading based upon. Breaking above the 1.40 handle could open up the possibility of a move towards 1.42 handle, which has been like a brick wall over the last several months, and therefore it would be very difficult to imagine this market breaking above there anytime soon.
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