We will see a continued hesitation to buy the British pound overall.
The GBP/USD currency pair has rallied a bit Tuesday as we have ripped above the 1.20 level. That being said, the area is a large, round, psychologically significant figure, and an area where we have seen a lot of market memory previously. Because of this, I think it’s probably only a matter of time before we see a potential selloff. That being the case, then I am paying close attention to any signs of exhaustion.
If we do rally from here, I think that the 1.22 level is an area that could cause some issues and is also an area where we have seen a lot of back and forth. The 50-Day EMA sits just above that and is dropping, so it’s likely that we would see a little bit of dynamic resistance. The British pound is obviously very strong in the last couple of trading sessions, but at the end of the day, we are still very much in a downtrend. Because of this, I think the market is probably going to continue to see a lot of “fade the rally” type of situations, but we need to see some type of exhaustion in order to place a trade.
All of that being said, if we were to break above the 1.24 level, then I might be convinced to start getting long of this market. Furthermore, we need to see what happens with the Federal Reserve and its statement going forward to determine whether or not we are going to see enough negativity coming out of the Fed as far as monetary policy is concerned to change anything. I suspect that’s not the case, so at this point in time, we will see a continued hesitation to buy the British pound overall. Furthermore, the economic situation in the European theater continues to cause problems with the British pound as well, as the UK and the EU are so heavily intertwined. With this, I think it’s probably only a matter of time before we fall again. If we break down below the 1.18 level, then it’s likely that the pound will go looking to the 1.16 level, possibly even the 1.15 level after that. As things stand right now, I have no interest in trying to short the US dollar anyway.
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