A pivotal moment
The pound has reached an interesting level against the dollar, one that could determine whether the pair is back in bullish territory or the end of a correction.
The pair found strong support around the 200/233-day SMA band a couple of weeks ago and has rebounded strongly since. This came after it broke below the 55/89-day SMA band in mid-June, which had been a reliable level of support over the last year.
The pair now finds itself running at the 55/89 band from below, which will be an interesting test of the strength of the breakout. A rebound off this level would act as confirmation of the breakout.
With the 55/89 band also falling around the 50 and 61.8 fib levels – June high to July low – it really is a big level for the pair. A move back above may be seen to be overriding the initial breakout while a failure could be a very bearish signal.
The key level below then arguably becomes 1.38, which coincides with past support on the daily chart but also some key levels on the 4-hour chart.
The pair only recently broke above the 55/89 and 200/233 SMA bands on the 4-hour chart which could give it momentum to run at 1.40 and break through major resistance.
A move below 1.38 takes the pair back below both moving average bands on the 4-hour chart, which could act as further bearish confirmation.
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