The GBP/USD initially tried to rally during the training session on Friday but gave back early gains as Jerome Powell made it abundantly clear that the Federal Reserve was going to remain very tight and continue to focus on inflation, not other economic indicators.
As a result, the US dollar spiked during the trading session, and it now looks as if we are going to see the next big move in favor of the greenback and of course a significant “risk off” type of move. The market breaking down below the lows of the last several sessions could open up a move down to the 1.15 level. The 1.15 level is my longer-term target, but it is more likely than not going to be very noisy. Any rally at this point in time still continues to look suspicious at best, and the 1.20 level could be the next area of resistance. That being said, the 50 Day EMA sits just above there as well, so it would make a significant amount of sense that we would see sellers in that area if we do rally. Ultimately, I think it’s going to be difficult to break above all of that, let alone even go higher.
Market Likely to Drift Lower as Britain Enters into a Recession
- This is a market that has been in a downtrend for quite some time,
- It makes sense that we would see a continuation of this trend for the time being.
- The market certainly has shifted to the downside during the day, and I think it’s probably only a matter of time before we pick up momentum to the downside on any rally.
The Bank of England has already stated that the British economy is going to go into a recession, so there are no surprises there. In that scenario, it’s likely that the Bank of England is done doing any type of tightening, as the economy is going to be too fragile. The market will ultimately be a situation where there is no real reason to buy this market, and therefore I will be waiting for opportunities every time we rally. This was an excellent shorting opportunity on Friday, and it’s likely that we continue to see negative pressure going forward. I have no interest in buying this pair anytime soon, at least not until the fundamental situation changes.
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