The GBP/USD pair initially tried to rally on Friday, but then turned back around to fall significantly. At the end of the day, we were pressing the 1.50 level for resistance yet again, and it appears that we will eventually break down. We closed just above that area, and the fact that we broke down below the bottom of three hammers that had formed earlier this week suggests that the market is starting to pick up serious momentum to the downside. Keep in mind that the US dollar is the strongest currency that I follow at the moment, and as a result it does not surprise me at all that we ended up selling off the way we have. Any rally at this point in time should be a selling opportunity as well, as this market looks so beat down.
Federal Reserve
The Federal Reserve is expected to raise interest rates sometime fairly soon, even possibly during the meeting in December. Because of this, the market is anticipating that the US dollar should strengthen, and then of course we also have the situation where the economic conditions around the world don’t necessarily look strong either. A lot of times that will drive money into the US dollar, as people begin to buy US treasuries in general.
It’s not to say that the British pound is a currency that I would be concerned about, just the fact that it’s not the US dollar. I believe that if we do bounce from here, and that is possible due to the fact that the 1.50 level is so psychologically significant, the market will more than likely find quite a bit of resistance near the 1.52 handle.
On the other hand, if we break down below the 1.50 level as a suspect we will, this market should then reach towards 1.48 level, and then the 1.45 level given enough time as we have seen the market find support in that general vicinity previously.
