The British pound has had a strong week, clearing the 200 week EMA Handley as we head into the holidays.The British pound has initially fallen during the week but then turned around to show signs of strength again. We ended up breaking above the top of the inverted hammer from last week, and by extension recapturing the 200 week EMA. That is a very good sign, and it does suggest that we are probably going to continue going higher. The British pound has been one of the better performers during the week, so now all we need to focus on is whether or not the momentum can continue?
GBP/USD Video 27.12.21
If it does, the next major resistance barrier will be the 1.35 level. After that, then you have to worry about the 1.37 level. Either way, it is a question that someone open-ended still, whether or not we have bounced enough to call this a bit of a bottom. The next couple of weeks will probably determine everything, especially after we get that nonfarm payroll number in January. After that comes out, you typically see the market has turned back into normal liquidity, and therefore you can trust the moves a bit more. What I find particularly interesting about the British pound rally in the way it has, is the fact that almost no other currencies did the same thing. It was not the US dollar story; it was most decidedly a British pound story.
At this point, buying small dips might be the way to go going forward, but you need to keep your position size reasonable because of the lack of liquidity for the next 10 sessions or so. With that in mind, be cautious, but I certainly think you should be looking higher at this point
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