The British pound has initially tried to rally during the trading session on Monday, but then struggled to break above the 50 day EMA. That of course is a technical indicator that a lot of people will pay attention to, so it is worth noting that the market turned around right there. With that being the case, it is likely that we will see a lot of volatility, but most certainly negativity. The market will probably go looking towards the 200 day EMA underneath, which of course is an area that a lot of people pay attention to as well. Ultimately, this is a market that I think finds plenty of reasons to be noisy, because the Brexit alone.
Beyond all of this, we are seeing across-the-board US dollar strength early in the day, so as long as we are in a “risk off” type of situation, it is likely that the British pound will suffer as a result. If we were to break down below the 200 day EMA which is painted in black on the chart, could send this market down to the 1.25 handle, which is a very real possibility with the way that it has acted as of late. Ultimately, this is a market that I think does find itself going lower given enough time, and quite frankly it is only going to take yet another nonsense headline or Tweet that gets people concerned about the United Kingdom. Furthermore, we have to worry about the United Kingdom locking down again.