The British pound has been choppy in the trading session on Wednesday but stayed on a green candlestick as the 1.3750 level is an area that has been important. This is a market that I think is trying to find its trend, although the US dollar has been strengthening against almost everything out there, with perhaps the exception of the British pound.
To the downside, the market sees support at the 1.3775 handle, and if we were to break down below there it is likely that the market could go down to the 1.35 handle where I would anticipate seeing even more support at the 200 day EMA is racing towards it. The 200 day EMA of course is an indicator that a lot of people will be paying close attention to as most traders will look at it as a potential trend defining indicator.
All being equal, I think it is more likely that we bounce from here than break down and clearing the Monday candlestick to the upside would be a very bullish sign. At that point, the market would probably go looking towards 1.40 level, an area that has been resistance multiple times. Breaking above there then would allow the market to go looking towards the 1.42 handle, which is a major weekly resistance barrier that we recently pulled back from.
We do not think that we break down below the 1.35 handle anytime soon, but if we did that would obviously change quite a bit of attitude for traders around the world, and I would have to re-evaluate the entire situation in the British pound. With the UK economy opening back up, this might be the one currency pair that supports something other than the US Dollar now.
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