The British pound has gone back and forth during the trading session on Monday, as we continue to look at the market between the 1.24 level and the 1.25 level as trying to fight through a barrier. That being said, the market is likely to continue to break above there, then it’s likely that we could continue to go much higher. The initial target would be the 1.2750 level, an area that had been significant resistance previously.
At the same time, we also have support underneath near the 1.2350 level and of course, the 50-Day EMA which sits just below there. The 50-Day EMA has a nice slope to it, so it does suggest that there will be buyers in this market if we pull back. In general, I think the market will continue to try to go higher, perhaps more of a grind than anything else. However, whether or not we can actually break out as a completely different story. There are a couple of candles near the 1.2350 level underneath it suggest there are buyers in that area, so if we were to break down below there then I think the British pound could start to pull back.
For what it is worth, it is probably worth mentioning that the British pound seems to be struggling quite a bit more than the euro at the moment against the US dollar, so perhaps the real trade would be in the EUR/GBP pair. While both currencies have been bullish against the US dollar, it appears that the British pound has had a bit of a brick wall in this area, so it’s possible that it’s trying to tell us something as it slows down momentum.
That being said, if you choose to short the dollar, it’s probably easier to do it against other currencies than the British pound, which has already been one of the best-performing currencies this year, but has obviously run into a significant amount of resistance, and perhaps even exhaustion after such a big move against the greenback. The volatility will probably only pick up at this point, so that’s probably something worth paying attention to as well, which can be worked against via position sizing.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.