I suspect that on the first signs of exhaustion, sellers will probably come in. As far as the Friday session is concerned, I would not get involved.
The British pound has rallied right back into a major resistance area against the US dollar during trading on Thursday as we seemingly have no idea where we want to be. Exacerbating this is the jobs number coming out during the day on Friday, so I would expect more chop and meaningless momentum.
When you look at the longer-term trend, it is to the downside. However, people are starting to suggest that the Federal Reserve will not be able to tighten as much as they had suggested previously, so people are betting against the greenback again. That being said, it is probably only a matter of time before people freak out again and run back to the US dollar, but in the meantime, we are left dealing with this kind of noise. Unfortunately, this is a very difficult environment to trade because we have these vicious countertrend rally days like we had multiple times on the way up here. You will notice that most of the candlesticks are rather large, and have conflicting colors. In other words, nobody really knows what they’re going to do.
You would have to assume that over the longer term the trend holds, but you can’t necessarily bet on it. After all, markets will do whatever it is they’re going to do but it certainly looks as if they want to press the issue in the meantime. I would anticipate a lot of sloppy and difficult trading, and Friday is probably going to be a great day to lose money. With this, I would wait to see how the market plays out on Friday before I would put any money to work because where people will hold money over the weekend says a lot about how they feel about the market. Right now, it’s all confusion.
If we were to break above the 1.27 level, it would be a bullish turn of events and could have this market looking for much higher levels. At that point, I would anticipate that we could get a move to the 1.30 level over the longer term. That being said, it’s not until we break above there that I would consider the trend wiped out and to be one that is positive. I suspect that on the first signs of exhaustion, sellers will probably come in. As far as the Friday session is concerned, I would not get involved.