The British pound has broken down a bit during the trading session on Wednesday, reaching towards the ¥133 level, and has bounced to show signs of strength again. Ultimately, the ¥135 level above is a large, round, psychologically significant figure that people will be paying attention to. It would not surprise me at all to see this market bounce towards that area before selling off yet again. We had recently seen a major breakdown in that area, so it does make quite a bit of sense that we would see sellers jump back into this market in that general vicinity. Even if we did break above there, the ¥136 level is even worse as far as resistance is concerned.
That being the case, it is likely that we will continue to see more of a “fade the rally” type of scenario, but in the short term it is difficult to short this market as we have ran so far in such a short amount of time. To the downside, I believe that the market is probably going to go looking towards the ¥132 level, where we had seen the initial push higher that had this market looking all the way up to the ¥143 level. Remember that we still have Brexit though, so there will be the occasional river that will throw this market back and forth. That is the hardest part of trading anything involving the British pound, the fact that sudden rumors or Tweets can come out of nowhere and slap you around. Because of this, you need to be cautious with your position size.
Reprinted from FXEmpire，the copyright all reserved by the original author.
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