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Christopher Lewis
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The British pound has initially rallied during the course of the trading session on Friday, but then pulled back to show signs of exhaustion at the 1.40 handle. That being the case, the market is likely to see a lot of pressure in this area as it is a large, round, psychologically significant figure, and of course the market will be paying attention to it. Quite frankly, if we can break above the 1.40 handle, that would be a very bullish sign for the British pound and could send this market much higher. On the other hand, if we were to break down below the 50 day EMA, that could cause some issues.

GBP/USD Video 02.08.21

Breaking down below the 50 day EMA then opens up the possibility of a move back down to the 1.37 handle, which is where I would also expect to see the 200 day EMA sits at. With that being the case, I think this is a market that will try to break down significantly, perhaps reaching to the 1.35 handle if we do get down there. That being said, the most recent move has been as bullish as it has ever been, so I think it would take something rather ugly to make this a reality.

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With this situation, I would be much more likely to buy a pullback on signs of support if we get it than to be short of this market, at least as things stand at the moment. Whether or not we can break above the 1.42 handle above is a completely different question that we may have to ask in the next few weeks. That is an area that has been crucial more than once.

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