The GBP/USD initially gapped higher on Monday but gave back those gains rather rapidly as we continue to see US dollar strength and a lot of noise coming out of the UK. The 50-Day EMA may have been reason enough to start shorting, because this is a currency pair that is completely divergent. Do not get me wrong, I do think that you could get the occasional bounce, as we have certainly seen over the last couple of weeks, but given enough time, the US dollar is still where you want to be given the choice.
The 1.15 level should continue to be significant resistance, and of course a large, round, psychologically significant barrier. This is an area that previously had been supported, but more than anything else it will continue to be psychologically important due to the fact that the round figures always attract a certain amount of options trading. You can say the same thing about the 1.10 level underneath, which should be supported due to that same factor and the fact that we had bounce from there the last time we got to that general vicinity. If we break down below there, then the floodgates will almost certainly open.
Is there hope out of the UK?
As things stand right now, it looks to me like the market is going to continue to see at least some hope coming out of the UK, so I imagine we probably stay between 1.10 and 1.15, so therefore I would look at this through the prism of range bound trading, but more or less with a downward tilt. Because of this, I’m looking for shorting opportunities on shorter time frames, but have no interest in buying dips. Yes, I realize we will bounce from time to time, but it’s much more likely that we break down below support than breakout to the upside.
- If we were to turn around and take off to the upside, then it’s possible that the trend could change eventually, and I will have plenty of time to make back any losses as trends in the Forex world tend the last 4 several years at a time.
- Regardless, I think there’s so much in the way of negativity out there it’s almost impossible for this market to shoot straight up in the air right now.
- You should have plenty of time to recognize a shift.
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