The British pound has rallied against the US dollar on Tuesday but faces major resistance just above, with the 1.25 level being a key psychological level. The market has formed a double top near the 1.24 level, suggesting significant resistance that could extend to the 1.25 level. On the downside, the 200-Day EMA sits just above the 1.21 level and should offer significant support. The 50-Day EMA is also intertwined with the 200-Day EMA, making it a dynamic support barrier.
Waiting for the Signal to Short the Market
The longer-term chart shows that the market is trading between 1.24 on the upside and 1.1850 on the downside, with exhaustion just above being a signal to short the market. If the 1.25 level is breached, the market could potentially rally to the 1.2750 level and then to the 1.30 level. I believe that we are going to spend the rest of the spring and summer bouncing around between these areas, but if we do finally break out, it could lead to a longer-term swing trade. Ultimately, I do favor the downside, but I also recognize that traders around the world are trying to do everything they can to force the Federal Reserve to cut rates.
The risk appetite of the market will also have a major influence on not only this pair, but other currency pairs around the world. I don’t think that we have a lot of clarity ahead of us, and the risk of something bad happening far outweighs the good. Fed Futures Funds markets have already suggested that perhaps the Federal Reserve is going to cut interest rates by hundred and 50 basis points, but quite frankly the Federal Reserve denies this being the case. Stay tuned, we have a lot of decisions to make, and it makes quite a bit of sense that we would see volatility in the markets as a result.
- Overall, the market will likely be influenced by risk appetite, with the US dollar considered a safety currency.
- If there is selling pressure in the market, it could lead to the US dollar rising against most major currencies.
- This will be especially true against the British pound which has a lot of headwinds in its home economy, as it faces a lack of growth and inflation at the same time.
- The market remains confused.
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