Apparently someone forgot to tell the British Pound that this whole Brexit saga is a “bad” thing for currency rates. But then I’ve been saying for a while that sentiment has slipped too far too fast. And when everyone is screaming “sell,” that’s my cue to begin looking for buying opportunities.
Now, I’m not saying that GBPUSD is a buy just yet. A few things stand in the way of making that call, two technical and one fundamental.
From a fundamental perspective, we have Wednesday’s FOMC statement. Per usual, the event is likely to trigger an increase in volatility for the US dollar, which makes taking a new position in a pair like GBPUSD ahead of the event a risky endeavor.
Now for the technical side of things (which is what matters most to me). The first factor holding me back from becoming overly bullish the pound is that we haven’t yet closed the day above the eight-month trend line that extends from the August 2015 high. It looks to be the probable outcome of today’s session, but with 7 hours to go, it’s far from guaranteed.
As you may well know, nothing is confirmed in the technical landscape until the day closes above or below resistance or support respectively. At least this applies to those who rely on the daily time frame to produce buy and sell signals.
The second technical hurdle is the February high at 1.4670. Although this is not the current 2016 high, it is an apparent swing high and is, therefore, likely to cause a bit of trouble for longs.
Between the two levels, the eight-month trend line appears to be the more significant. But regardless of how strong the 1.4670 handle may or may not be, I don’t want to take the chance of buying into it, especially ahead of tomorrow’s event.
All in all, the timing couldn’t be more perfect. We have a pair that has been severely depressed over the years making a key technical break ahead of an FOMC meeting.
Let the waiting game begin.