British Pound Continues to Find Buyers

Alan Penny

29 October 2019

2 min read

Brexit concept

  • Sitting above 200-day EMA
  • Bouncing nicely from lows of the session
  • Continues to grind upward

The British pound has initially fallen during the trading session on Wednesday but then turned around to form a relatively bullish candle by midday in America.

That being the case, it looks as if the market is going to continue to find its supporters given enough time. It’s likely that we will continue to see volatility, but it certainly seems as if there is more of an upward slant or tilt to this market. Buyers continue to pick up value when they see it, shown in the form of pullbacks.

Plenty of headline noise

One of the biggest things a trader must deal with when trading the British pound is the massive amounts of headline noise that seems to be almost unending. Obviously, Brexit is the biggest contributor. With the European Union giving the United Kingdom another extension of 90 days to sort things out, this has relieved some of the pressure on the pound.

Historically, the British pound is still cheap

This continues to show that the market believes that things are getting better, but they aren’t quite where they need to be. Historically, the British pound is still cheap, but at this point, there are so many possible variances of headlines that one should be very cautious about their position size trade if the British pound ran out.

Technical analysis

The technical analysis of this pair is extraordinarily bullish. Not only have we turned around to form a bullish sign of trading during the day, but the market is most certainly seeing plenty of bullish signs underneath.

We are well above the 200-day EMA, but we’re also are forming a bit of a bullish flag. That is a very bullish sign, and we are banging against the 1.30 level. That is a large, round, psychologically significant figure that will, of course, attract a lot of attention. Therefore, if we were to break above the 1.30 level, the market would show that the trend is most certainly changing overall.

All things being equal, the idea of buying dips in the British pound is promising, as it looks like traders are trying to price out the worst-case scenario that had been so concerning.

However, if the market broke down below the 200-day EMA, which is closer to the 1.27, then it would very likely go down to the 1.25 handle. This is a significant figure as well, and a scene of clustering from previous trading. With that in mind, it should be a bit of a “floor” in the market.

All things being equal, the British pound does look like it’s trying to build up the necessary momentum to finally break above the significant 1.30 level. That doesn’t mean it won’t be noisy, or that there will be the occasional headline that throws things into a tantrum, but overall this seems to be the pattern.

Written By
Alan Penny

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