- The GBP/USD initially shot higher during trading on Tuesday but has pulled back from the crucial 1.20 level as we have seen a lot of volatility during the day.
- Not to be outdone, Russia decided to launch a couple of missiles into Polish territory, so that has everything on fire at the same time. With that being the case, it’s not overly surprising that we have seen a complete turnaround in the action for the session.
- If we continue to see this type of momentum, it’s likely that we will get a pullback toward the 50-Day EMA. That is at roughly 1.15, an area that obviously would have a certain amount of interest paid to it as well.
Ultimately, a lot of this came down to the fact that a Russian rocket landed in Poland, killing a couple of civilians. This has the world worried about an expanded war in Europe, which quite frankly seems to be what most leaders want at this point. With that being the case, it’s not a huge surprise to see money flowing out of the European region, and into the safety of the US treasury market. That’s not to say that I’m a huge fan of the United States, but it is the “clean his shirt in the laundry.”
Dollar Could Surge
If we break down below the bottom of this candlestick you think that you will see a little bit of a push lower, and of course, the market was far too over-extended, and it should not be a future price to see that we have in fact found exhaustion. When the market gets too far ahead of itself, it only takes a headline to make it freak out.
At this point, I think the 1.20 level continues to be crucial from a longer-term standpoint, so I look at it as a potential ceiling in the market. If we were to break above there, then you must start thinking about the British pound changing trends completely but right now the fundamentals just don’t line up for that. The market has tried to bully the Fed into changing its monetary policy, but the Fed continues to hold its own. If that’s going to be the case, we have a very real possibility of a sudden surge in the US dollar again.
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