The British pound was choppy on Thursday, as we continue to consolidate in general. We are in a larger consolidation area, which extends down to roughly 1.3050, but is also supported by the 1.30 level underneath, as it is the intersection of both horizontal support, and an uptrend line that has been reasonably important over the last several weeks. I believe that the top of the area is closer to the 1.3333 level, and is very likely to offer a significant amount of resistance. Because of the action that we have seen recently, I have been looking at the stochastic oscillator, as it gives me an idea as to when we are overbought or oversold. In these range bound type of markets, it’s easy to see how you can get chopped up if you do not continue to play “small.” By waiting for a longer-term move, you can make large profits over the longer term, but I believe that this pair is going to continue to be very sideways for the near term.
You have the Bank of England on one side of the Atlantic suggesting that perhaps they are going to raise interest rates as quickly as once thought, and although we have the Federal Reserve looking like we to raise interest rates, there is a certain amount of skepticism when it comes to that, and I think you’re starting to see that in this chart. I would not be surprised to see this market go back and forth in the purple rectangle that I have on the chart for the next several weeks. In a situation like that, a nice short-term range bound trading system becomes the best way to trade the market, and of course keeping your position size somewhat small. I believe that the upside is still favor though, because we have the double support below.
Written by FX Empire