The British pound has suffered at the hands of the US dollar during the trading session on Tuesday, to go looking towards the 200 day EMA. The 200 day EMA sits just above the 1.37 level, an area that I would anticipate offering a significant amount of support, so whether or not we can simply slice through there is a completely different question, but at this point it certainly looks as if we are going to try. The fact that we are closing towards the bottom of the candlestick does in fact suggest that we are probably going to at least see an attempt to follow-through, so keep that in mind. If we break down below the 1.37 level, then it is possible that we could see a lot of negative pressure to try to send the British pound back to the 1.35 handle.
The market turning around at this point in time could be a positive sign, but we need to take out the 50 day EMA finally in order to think there is a really good chance of this market going higher for any significant amount of time. At that point we would have to go looking at the 1.40 level, which is a large, round, psychologically significant figure and of course an area that would be difficult to break above as we have seen multiple times. Above there, then you have the even more formidable 1.42 handle. I think the market is starting to come to grips with the idea that perhaps the global growth story is not as strong as the narrative had been pushing.
If that is in fact going to be the case, then the US dollar will be the favored currency, as money is rushing into bonds. This is not necessarily an anti-British pound move, because we have seen US dollar strength across-the-board during the trading session so to think that this market would suddenly turn around is probably asking a lot and less something drastically changes. The market participants out there seem to be in no mood to risk, so therefore a lot of traders are simply jumping into US government paper. The selling of anything not the US dollar has been widespread during the day, and has been rough enough that I think we will continue to see more of the same.
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