The British pound rallied significantly during the trading session on Wednesday after the Federal Reserve raised interest rates by 75 basis points.The market is more or less going to continue to see the overall downtrend continue, due to the fact that the market has seen a line of negative pressure. The 50 Day EMA sits near the 1.22 level, which is an area that has been important multiple times. The market is likely to continue to see sellers come into this market as we have been so negative over the longer term.
Underneath, the 1.20 level underneath is a large, round, psychologically significant figure, and therefore we do see a little bit of market memory in that area, especially as we had previously seen the 1.20 level offer such resistance, as well as support. Ultimately, this is a market that I think is going to find one reason or another to sell off, not the least of which is the fact that although the Federal Reserve was seen as being dovish by the market, the reality is that the market always seems to get it wrong the first day. It’s more or less a relief rally at best.
If we can break above the 50 Day EMA, then the market could go to the 1.24 level. The 1.24 level is an area where we have seen noise out in the past as well, and I think it extends to the 1.25 level. Any signs of exhaustion in that area would also be a nice selling opportunity as well. Regardless, I think this is a market that you are looking for signs of exhaustion that you can get involved with. The candlestick for the trading session was rather impressive, but when you look at the big picture, it is likely that we will continue to see the overall economic uncertainty come into the picture and cause people to run to the US dollar yet again. The market has been a very messy place over the last couple of months, and the market should continue to be very much the same. At this point, the Federal Reserve will be data-dependent, and the date is going to look miserable when it comes to the inflation numbers as we have seen recently.