- The GBP/USD has been struggling in recent weeks, with the currency unable to gain any significant momentum.
- Despite bouncing from the lows earlier this week, it appears that the pound is set to test the lows again in the coming days.
- The sluggish British economy, combined with inflation, is contributing to this trend. Meanwhile, Jerome Powell's desire to keep interest rates tight for longer is boosting the US dollar.
If the pound breaks below the lows of the Wednesday session, it's very likely that it will work its way down to the 1.15 level, which is a major area. The market has already made up its mind, and only needs some type of reason to push the pound down further. Looking at the chart, we can see that a massive "M pattern" has formed, which is just an extended double top. This indicates that rallies are likely to be sold into, and traders may look for signs of exhaustion on short-term charts to enter the market.
While some traders may consider buying the pound, it may not be the best move at this time. The move seen on Tuesday was a continuation of the massive selloff that occurred previously, after forming a significant double top at 1.24. This top now appears to be the top of the entire recovery rally. Therefore, feeding short-term charts that show signs of exhaustion may be a better option.
Shorter Term Trades Seem to be the Flavor of the Day
It's important to note that this won't be like last year when the US dollar was like a freight train. It'll be a general move toward the US dollar, rather than a meltdown of the British pound against it. Traders should keep this in mind and dial back some of their expectations.
The pound is facing a tough time in the current market, and it's likely that it will test the lows again soon. Traders should look for signs of exhaustion on short-term charts and consider feeding into them, rather than trying to buy the pound. With the US dollar gaining strength due to Jerome Powell's comments on interest rates, it's a difficult time for the pound to make any significant gains. However, traders should keep an eye on the market and adjust the length of their trades as we continue to see a lot of volatility. Quite frankly, shorter-term trades seem to be the flavor of the day.
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