- The GBP/USD currency pair has initially tried to rally during the trading session on Tuesday but gave up gains rather quickly.
- At this point, we ended up forming a bit of a inverted hammer, therefore it does make quite a bit of sense that we will continue to see downward selling pressure.
- If we break down below the bottom of the candlestick, we are getting very close to kicking off a major “M pattern.”
Downward Pression Expected
I do think that if we break down below the bottom of the M pattern, the measured move is for the British pound ago looking toward the 1.1550 level, which is an area that previously had seen a lot of interesting price action. At this point, if the market were to see a lot of downward pressure, we could really fall apart, but I suspect that there will be enough liquidity down there that people will be looking to pick up “cheap British pounds.”
Either way, I think the US dollar continues to strengthen in general, as we have seen a lot of fear into the market, and of course the United Kingdom itself has a lot of issues. Although the UK economy is not as bad as once feared, the reality is that they are probably going to be facing a lot of headwinds, so it does make sense that the British pound continues to get sold off. The US dollar picking up strength against almost everything in the last couple of days has really expose the British pound for the weakness that it has, as it has underperformed other currencies to begin with.
The market breaking above the top of the candlestick, and by extension the 50-Day EMA in the 200-Day EMA indicators, would be a very bullish sign. However, I think at this point we’ve got a situation where we have already tried to do that during the Jerome Powell speech, and just simply could not pick up the momentum necessary to make that happen. Because of this, I think it’s very unlikely that we see that happening anytime soon, and I do think that a breakdown is probably more likely than not at this point. The shape of the candlestick looks ominous, and I do think that we just made a huge “double top” that almost everybody in the world can see.
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