The British pound has rallied to kick off the trading session on Wednesday on the bullish foot. However, the market has pulled back from the 1.3750 level again, an area that seems to be a bit of an issue in general. With this being the case, I think that the market probably finds pullbacks as attractive, especially near the 1.35 handle underneath as it is not only a large, round, psychologically significant figure, but it is also an area that features the 50 day EMA now.
Because of this, I think what we are looking at here is the opportunity for value hunters to come back into the marketplace and take advantage of what is typically going to be thought of as “cheap pounds.”
The 50 day EMA itself of course attracts a lot of attention, but at the end of the day I think what we are seeing here is the likelihood of a “continuation of the buy on the dips attitude” that we have seen for so long. Stimulus is one of the main drivers of this pair to the upside, and although we already know that there is going to be more stimulus coming out of the United States, the reality is that we do not know how much of it there will truly be at the end of the day.
Because of this, I think what we are looking at is an opportunity to take advantage of what has been a very strong trend, but currently is suffering at the hands of a little bit of doubt when it comes to whether or not the stimulus package is going to be as massive as once thought.