In the short term, I would be very cautious about position size and any type of aggressive trading in a market that seems to be searching for some type of clarity.
The British pound has done very little during the trading session on Thursday, as we are waiting for the jobs number during the trading session on Friday. Because of this, the market will continue to be very volatile and choppy, but there are a couple of levels that I will be paying close attention to. With that in mind, we will take a look at a couple of potential triggers for the next big move.
The 50 Day EMA is worth paying attention to, because it does attract a certain amount of trading reaction under normal circumstances, and a break above that level would signal a major change in the attitude of the markets, perhaps allowing the British pound to go looking at the 200 Day EMA before it is all said and done. The 200 Day EMA sits just below the 1.35 handle, so that of course is something worth paying attention to as well.
On the downside, the 130 level is a major support level that traders will have to pay close attention to, as it has proven to be important more than once. The area of support extends down to the 1.28 handle, and therefore it looks as if that area will be very difficult to break below. If we were to break down below the 1.28 handle, the market would almost certainly fall apart in a very drastic move. At that point, I would anticipate that the British pound could go looking for the 1.25 handle.
The noisy behavior over the last several days has been very choppy, the reality is that most markets have no idea what they are doing at the moment, as it has been so noisy. The candlestick for the trading session on Thursday is rather indicative of what is going on around the world, as confusion continues. Ultimately, the US dollar will be thrown around by the jobs figure on Friday, and by the time we closed the session on Friday, we may have a bit more in the way of clarity as to where we are going next. In the short term, I would be very cautious about position size and any type of aggressive trading in a market that seems to be searching for some type of clarity. At the end of the week, we should have a little bit more to work with.