Overall, it seems that the market is taking a wait-and-see approach to the British pound.
- The GBP/USD has rallied ever so slightly during the trading session on Thursday as we continue to see a lot of back and forth in the same area that we have been in.
- The 1.24 level on the bottom and the 1.25 level on the top show quite a bit of noise in choppiness, perhaps the market is trying to work off the froth from the initial push higher.
- Ultimately, this is a market that is trying to determine whether they will take off, or if the market has gotten a bit overdone and needs to pull back.
If the market were to break down below the 1.2350 level, then it’s possible that we will test the 50-Day EMA, and then perhaps break down to the 200-Day EMA which is closer to the 1.22 level. The market breaking above the 1.2550 level opens the possibility of a move to the 1.2650 level, which is the last vestiges of resistance. Anything above there has this market turning into a “buy-and-hold” type of market, opening the possibility of a move all the way to the 1.30 level.
The market is generally very noisy, and I do not think we are ready to do so. There are a lot of PMI numbers coming out during the day on Friday which could give us a bit of a momentum-building move, but in the short term, it looks as if we are going to continue to see a lot of choppy behavior and therefore think we’ve got a situation that the market is building up inertia to start trying to build up a bigger move. After all, a market cannot sit still forever, and I think you are starting to see the argument made that we would break out sooner or later. As you can see on the chart, I have a rectangle that shows exactly what I think the market is trying to figure out at the point we are in right now, whether we can break out of this little area.
Overall, it seems that the market is taking a wait-and-see approach to the British pound. While there are some positive signs, such as strong economic data and a more optimistic outlook for Brexit negotiations, there are also concerns about the impact of rising inflation and global economic uncertainty. As such, it may take some time for the pound to break out of its current range and make a sustained move in one direction or another. Traders should be prepared for continued volatility and should closely monitor key events and data releases to stay ahead of the curve.