The GBP/USD initially rallied during the training session on Wednesday but gained back gains as the US dollar came roaring back. At this point, it looks like the 1.25 level is going to continue to be difficult to overcome, and the action on Wednesday will more likely not only show how hard is going to be but reinforce that idea as well.
The 200-Day EMA is near the 1.21 level underneath, with a 50-Day reaching towards it, sitting just above the 1.20 level. If we do get that cross, the so-called “golden cross”, then it is technically a longer-term “buy-and-hold” signal, but I think when you look at the candlestick patterns over the last several months, it looks like we are either forming a double top at this point, or we are going to go back and forth in a consolidation area with the 1.20 level underneath being the bottom of the range.
Volatility Ahead
- If we turn around and break down below the 1.20 level, then it’s likely that we go down to the 1.15 level underneath.
- The 1.15 level is an area that previously has been resistant and of course, it is a large, round, psychologically significant figure.
- That is a nice target if we break it down, and therefore it’s likely that we could see that as where we go on some type of US dollar strength.
- Keep in mind that the British pound has been going higher in the earlier part of the session as the British released a strong inflation number.
All things being equal, we must worry about whether the market is more likely to start freaking out on the idea of a global slowdown, or if we are going to continue to ignore the Federal Reserve. During the day on Wednesday, we have seen a couple of Federal Reserve Governors come out and suggest that there should be rate hikes coming and that we should stay “higher for longer.” Ultimately, the market is likely to continue to see a lot of volatility, and therefore you need to be very quick with your position movements. Furthermore, I keep the position relatively small until we get some type of impressive breakout of this range that we are currently trading in.
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