The initially tried to rally during the week but as you can see on the longer-term charts, there is a downtrend line that keeps the market down. We did of forming a bit of a shooting star, and it’s likely that we will continue to see sellers. At this point, I think that short-term traders will continue to fade rallies as they happen, and therefore the overall trend will continue itself.
Underneath, the 1.27 level should be massive support, and I think we could be trying to form some type of descending triangle. If we break down below the 1.27 handle, it measures for a move as low as 1.22, which has been massive support in the past, and would make sense as a target. That of course is the overall attitude of the market, and other words US dollar positive, and therefore I think higher interest rates makes quite a bit of sense. Beyond that, we have the Brexit going on which of course is causing a lot of trouble. The headlines continue to be negative overall, so there’s no point in trying to press the issue.
However, if we were to break above the downtrend line, then we could go as high as the 1.35 handle. Overall, I think a break to the upside would be very powerful, because there’s so much in the way of selling pressure just above as represented by the long wakes on the candlesticks. I think that this point in time it looks likely that the path of least resistance is to the downside.
With the Federal Reserve raising , and of course the Brexit causing a lot of concern, I think it makes perfect sense that the pair drops from here and goes looking for the major support underneath. Fade short-term rallies going forward.
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