- The GBP/USD has fallen rather hard during the trading session on Thursday after the Bank of England raised interest rates by 50 basis points, but more importantly, did not do it in a unanimous fashion.
- As that is the case, it’s possible that the Bank of England may be one of the first ones to flinch.
- The addition of 50 basis points into a recession will almost certainly grind growth down a bit further, so we must reevaluate the British economy.
The 200-Day EMA underneath is going to continue to be an area of interest, so if we were to break down below there, it’s likely that we would see this market really start to unravel opening the possibility of a drop-down to the 50-Day EMA. Furthermore, it’s probably worth noting that this is a massive outside candlestick, so this could be the beginning of the end for the uptrend. Granted, that’s a huge call to make right now but it certainly looks as if we are during rethinking everything.
Pay Attention to the Next Couple of Days
All things being equal, the 1.25 level has offered a significant amount of resistance, that was an area that I’ve been thinking could be rather crucial. If we continue to see that area offer a bit of a ceiling, we may begin to continue the overall downtrend. Most of what we’ve seen over the last several weeks has been traders assuming that the Federal Reserve would give up its tightening, as they have been accustomed to being spoon-fed liquidity. After the FOMC statement and press conference on Thursday, it became apparent that Jerome Powell was going to stick to his guns, and that the restrictive monetary policy is going to be a longer-term feature of the economy.
With, if we were to turn around a break above the 1.25 level, then it’s possible that the British pound could really start to take off. At that point, I think you have a complete trend change because quite frankly it’s not that out of the realm of possibility that we could jump above the 200-Day EMA, only to turn around and sell off again. Ultimately, this is a situation where there has been a major shot across the bow of the buyers, but the next couple of days will really give us a bit of a heads-up.
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