GBP/USD Forecast: Pound Struggles with Noisy Trading

The GBP/USD initially rallied during the day on Tuesday, but as you can see on the chart, we did not break out to a fresh, new high. This is perhaps not a surprise, because there’s a lot of noise out there in the markets. When I look at this chart, there are a couple things worth noting though.

Advertisement

Take advantage of today's market opportunities

START TRADING NOW

The 200-Day EMA currently sits right around the 1.21 level, and the 50-Day EMA has just broken above the 1.20 level. This means that there is a significant amount of technical support underneath, but I don’t think that it’s a sign that we are necessarily solid at this point. After all, we have a lot of concerns when it comes to the markets right now, and a run to the US dollar would not be a huge surprise. After all, the US dollar is thought to be a safety currency, so if we start to see a lot of fear out there, it’s very likely that we could see the US dollar finally gain some strength. Breaking down below the 50-Day EMA and the 1.20 level would kick off quite a bit of selling pressure from what I can see.

Other than, if we turn around and break above the highs of the last couple of days, then we are likely to get looking to the 1.2450 level, which is an area that is important to pay attention to, as I believe it extends to the 1.25 level, a large, round, psychologically significant figure. It’s an area that’s been important multiple times in the past so I think we need to pay close attention to it.

• You will continue to see a lot of noisy behavior, as we have over the last several weeks.
• This is a situation where a lot of traders have gotten chopped up, so you need to be cautious with the size of your trade.
• Sudden moves could be a simple fact of life in this situation.
• This is a market that is right on the precipice of a bigger move, so I will be watching closely as to what happens next, as the pair does tend to be very volatile at times.

We have to decide whether or not this is potential to be a flag, or not.

Ready to trade our Forex daily analysis and predictions? Here are the best Forex brokers in the UK to choose from.