The British pound has initially fallen during trading on Thursday but continues to find support at the previous downtrend line. Because of this, I think that the market is eventually going to build up the necessary momentum to break above the 1.40 level. If we do, then I think that the market is free to go towards the 1.43 level above. I recognize that this market is probably going to take several attempts to finally clear that level, but if we do break above the 1.40 level, it’s likely that we will continue to see noise in the market that will continue to provide upward momentum. If we can break above the 1.43 level, then it becomes a huge signal to start going long as it would be the market clearing major resistance barriers.
On the other hand, if we were to break down below the 1.38 handle, I think at that point we may unwind quite a bit and I would be short. I previously had suggested that perhaps we needed to go even lower to break down significantly, but at this point I think that the “floor” has moved higher. Because of this, I am bullish, but I also recognize that we have a lot of work to do to have the buyers take over. Expect a lot of volatility, but ultimately the volatility should give us opportunities to pick up value on short-term pullbacks.
Written by FX Empire