This is a market that continues to be “fade the rallies”, as this has been such a major downtrend for so long.
The British pound initially tried to rally during the trading session on Thursday, but as you can see on the chart we have rolled over yet again. At this point, the market looks as if it is going to continue the overall downtrend and the descending triangle. Looking at this chart, the market is negative, testing the 1.30 level underneath. The 1.30 level underneath is a large, round, psychologically significant figure, and an area that has caused quite a bit of support as of late.
What is worth noting right now is that there is a lot of support underneath the 1.30 level, that extends down to the 1.28 level. In other words, it is a very “thick zone of support” that could come into the picture if we try to break it down. I think it is likely to continue to see a lot of noisy behavior between those two levels, so I would be very cautious about jumping “all in” at this point. I think it is going to take quite a bit of time to get down to the 1.28 handle, unless of course something fundamentally changes.
If we were to turn around and break above the highs of the trading session on Thursday, we could go looking to reach the 1.32 level, which I think is considered to be a massive resistance barrier. Furthermore, not only has it been important multiple times in the past, but we also have the 50 Day EMA racing through that level, and falling. That should offer a bit of dynamic resistance, and therefore I think will attract a lot of attention in and of itself.
As things stand right now, this is a market that I think continues to be “fade the rallies”, as this has been such a major downtrend for so long. The market looks as if it is trying to chip away at the 1.30 handle underneath, but at this point, the amount of pressure has likely been building up, so whether or not we break down below the recent lows is a completely different question.
If we turn around and break above the 1.32 handle, then it is possible that the market could reach the 1.34 handle, which was a resistance barrier and is currently where we are seeing the 200 Day EMA move about as well.