The only way I see this changing for a bigger move to the upside is if we see a complete roundabout by the Federal Reserve.
The British pound went back and forth on Wednesday, essentially not having any idea what to do with itself. Unfortunately, we are in an area that is probably attractive to both buyers and sellers, and based on the way that we continue to bang around in this region, I don’t know if that will change anytime soon. When I look at this, I can see just how negative the longer-term trend is, but it’s also worth noting that the 1.22 level has been heavily defended.
The 1.24 level above is resistance, and I think a break above there would be a rather bullish sign, but even then I also can make an argument that the 50-day EMA which is presently slicing through the 1.26 level could come into the picture and cause a lot of selling pressure as well. Ultimately, this market continues to be very messy, but that’s true with everything right now, as the US dollar is by far the strongest currency, and there seems to be nothing but fear and noise in the markets. Add to that the fact that the Federal Reserve Chairman spoke during the day in front of Congress, and you have a recipe for a lot of nonsense.
Ultimately, I do favor shorting this market, especially as interest rates in America remain so elevated. With that in mind, I think this is a situation where eventually we do test the 1.20 level again, and then eventually break down through it. Once we do, I think we have a good shot at making a rather major move afterward. In that scenario, I anticipate that the 1.18 level could be targeted, and then after that the 1.16 level. Expect a lot of chop and volatility, but to be honest I could say that about almost every market that I follow right now. Everything is being thrown around by the bond market, so you need to keep an eye on the US 10-year yields because they will have a major influence on what happens next. The bond market continues to be a big mess, and that has a huge influence on what happens in currencies, stocks and everything else. The only way I see this changing for a bigger move to the upside is if we see a complete roundabout by the Federal Reserve.