The British pound fell significantly during the day on Thursday, as the 1.2950 level offered a bit too much in the way of resistance. Also, the Bank of England wasn’t as hawkish as people had hoped, and we of course went much lower, crashing into an uptrend line. However, I think that the resiliency of the uptrend line near the 1.2850 level should signal that buyers may enter the market. This is not going to be an easy trade. Having said that, I think that the buyers are returning, and I don’t have any interest in selling, least not yet. You will have to deal with a significant amount of volatility if you are trying to go to the upside in this pair, but alternately if we break down below the 1.2850 level, we will probably go lower and test the important 1.2750 level under there, which had previously been extraordinarily important as resistance. Once we break above there, all the sudden the British pound with very healthy.
Small positions only
I would not be placing a large trend trade here. I would be looking to build small positions to take advantage of the move to the upside, and a little bit of patience should offer plenty of opportunities to go long on short-term charts. I think that the market will eventually go much higher, but it seems as if we may have gotten a little bit ahead of ourselves, and may have to grind in this general vicinity for some time. Therefore, I would not risk too much trading capital in this one position, least not at one point in time. Longer-term, I still feel reasonably comfortable going long, but I also recognize that sometimes money is better spent in other places.
Written by FX Empire