On Tuesday, the British pound rallied to pierce the 1.25 level, which is an area of significant psychological importance for traders. It had been viewed as a resistance area between the 1.24 level and the 1.25 level, and breaking through it would be a major breakthrough for a long-term move. However, whether the pound can continue to climb higher remains a question, as failing to do so would signal that this is an insurmountable barrier.
If the pound does fall, the market could drop to the 1.23 level, and possibly down to the moving averages underneath. Despite this potential drop, the 50-Day EMA has broken above the 200-Day EMA, creating a “golden cross” that is attractive to longer-term “buy-and-hold” traders.
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It is important to note that much of the market movement depends on the actions of the Federal Reserve and traders’ expectations of it. Many anticipate that the Federal Reserve will cut rates soon, leading traders to price in a weaker US dollar. However, if the Federal Reserve does indeed cut rates, it would likely be due to a recession, during which the US dollar tends to perform fairly well. This is because although interest rates may drop, there is very little in the way of global growth to support other currencies.
Ultimately, the most important thing for traders to do is to pay attention to the market’s movements and not to make assumptions based on what it “should be doing.” While a daily close well above the 1.25 level would indicate that the British pound will continue to climb higher, it is important to wait and see how the market unfolds.
In conclusion, the British pound’s movement is largely dependent on the Federal Reserve’s actions and traders’ expectations. While the 1.25 level has been a significant resistance area, breaking through it would signal a major long-term move. However, failing to do so would suggest that this barrier cannot be broken, potentially leading to a drop in the market. Ultimately, paying attention to the market’s movements is crucial in making informed trading decisions.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite.
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