I think it is more likely that we will behave erratically in a sideways market with an upward slope.
The British pound fell significantly during Friday’s trading session, reaching the 50-day EMA. The 50-day EMA is a technical indicator that many people will pay close attention to as it may offer a bit of dynamic support and resistance along the way. That being said, I think the market will likely continue to find buyers as this candlestick is negative, but this is not a complete breakout.
The double bottom, which is just below the 1.2750 level, also offers support, as does the 1.35 handle, as the market has been in an uptrend for quite some time now. In this case, it is highly likely that we will continue to see buyers trying to intervene based on value. The US dollar continues to suffer in the long run, and I think a pullback at this point will only attract more money.
In fact, I am not interested in short selling in this market until we break below 1.35, which is unlikely to happen anytime soon. In the end, this double bottom under the current trade is very favorable and it will take significant momentum for it to fall apart. On the other hand, you should look at the 1.40 level as a massive resistance barrier because the market had quite a few problems to break above that level. If we were, it would open a move towards 1.42, which was previously a major obstacle. If we were to clarify this, the market is likely to head towards 1.45, but I don’t think that will happen any time soon. I think it is more likely that we will behave erratically in a sideways market with an upward slope.
If we broke below the 1.35 level, then I think this would open a huge move down, as it could trigger the end of the overall uptrend. It seems highly unlikely, but it is something to keep in mind as a potential move if we suddenly get a massive risk-averse environment that will force people back to the dollar.