Pound Has Wild Ride After BOE

If we were to break down below the 1.35 handle, then I think we have further downside.

The British pound has gone back and forth during the course of the trading session on Thursday to form a bit of a positive candlestick, as we have closed above the 200 day EMA. The Bank of England had decided to raise interest rates by 25 basis points, but there were several members of the Monetary Policy Committee that had in fact suggested a hike of 50 basis points. This shows that the Bank of England may be a bit more aggressive than other ones around the world.

That being said, we do have the US jobs report coming out during the trading session on Friday, so it could cause a significant amount of noisy behavior in this market. The 200 day EMA of course attracts a lot of attention as well, but even though the market looked very bullish during the trading session, the reality is that we did give back some of the gains and it was nowhere near as bullish as it could have been. Because of this, I think there is a little bit of hesitation but quite frankly we had shot straight up in the air for a while and a pullback does make a certain amount of sense. The question will be whether or not we can hold on and bounce from the 1.35 handle if we do break down. If that is in fact going to be the case, that would be very bullish.

Alternately, something could come out of the jobs number that has people running away from the US dollar, which could send this market above the highs of the trading session on Thursday, a very bullish sign indeed. At that point, we would probably go looking towards the 1.37 handle, maybe even the 1.3750 level which is where we had pulled back from previously.

It is worth noting that the most recent high was lower than the one before it, and of course risk we had broken above a significant downtrend line, but then broke back down below it. In other words, it has been very messy trading but that is typical if we were to see some type of longer-term trend change. Trend changes are never clean-cut it seems, and that snacking of any different here. However, if we were to break down below the 1.35 handle, then I think we have further downside.