- The British pound has stabilized a bit during the trading session on Wednesday as the risk off move from the previous session has been somewhat abated.
- That being said, it's obvious to me that the 1.12 level above is an area that we are going to have to pay close attention to.
The 50 day EMA has broken below the 200 day EMA and kicking off the so-called death cross, but really at this point in time, that's an indication that's almost always too late. I think that the area around the 1.12 level will continue to be difficult. So, if we can break above there, that would be something worth paying close attention to.
Top Forex Brokers
But on a break lower…
On the other hand, if we break down below the 1.1050 level, it's possible that we could drop down to the 1.08 level. Keep in mind that this pair is highly sensitive to risk appetite as the Swiss franc is considered to be a safety currency. And of course, while the British pound is not necessarily a risky currency, it's much more risk on. You also have to keep in mind that you do get paid via swap to own this pair. So, it's a form of carry trade.
In general, this is a market that I think continues to be noisy, but given enough time, we should be looking at a potential breakout to the upside as long as things don't fall apart. On the other hand, if we do see a lot of risk off behavior in other markets such as equities, that will more likely than not push this market lower. In that environment you might find that most things are not working, including the British pound. You would probably see the bond markets do fairly well, as well as safety currencies such as the Swiss franc and the Japanese yen. While I am not calling for that, there are certainly a lot of volatile headwinds out there that could cause headaches and keep this potential move a possibility.
Ready to trade our Forex daily analysis and predictions? Here are the top UK forex trading platforms to choose from