- The GBP/USD currency pair has rallied slightly, but is approaching the crucial 1.24 level, an area that has formed a significant double top.
- This area, extending to the 1.25 level, is expected to be very challenging to break above, with the market facing considerable selling pressure in this general vicinity.
- As a result, the market is expected to pull back into the previous consolidation area, and it is unlikely to change anytime soon, as the market continues to grapple with confusion surrounding the overall directional bias.
Expect a Pullback Soon
The global economy is slowing down, which does not bode well for currencies outside of the United States. As we head into a recession, the US dollar is expected to be one of the main beneficiaries, potentially causing selling pressure for the British pound. The 50-Day EMA is currently threatening to break to the upside, sitting just below the 200-Day EMA. However, the moving averages are flat, so traders should not read too much into that, other than the market is likely to continue its consolidation phase. The moving averages are near the 1.21 level, which is expected to be a minor support level.
The 1.20 level is a large, round, psychologically significant figure, but traders should also keep an eye on the 1.1850 level, which has been significant support multiple times. Breaking down through that level would be very negative, and in that environment, the British pound is expected to drop all the way down to the 1.15 level. However, if it breaks above the 1.25 level, it could kick off a “buy-and-hold” type of market, with the US dollar losing strength over time. In that environment, traders should look for the US dollar losing value against many other currencies at the same time, before following that move.
The British pound has rallied slightly but is facing considerable selling pressure near the crucial 1.24 level, which is an area of significant resistance. The market is expected to continue its consolidation phase, with the global economy slowing down and the US dollar potentially gaining strength in a recession. Traders should keep an eye on the support levels, including the 1.20 level and the 1.1850 level, to gauge potential bearish moves in the market. By having a solid trading strategy, managing risk, and staying informed, traders can potentially navigate the Forex market with confidence and potentially achieve their financial goals.
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