- The GBP/USD found itself on the losing end once again during Monday's trading session, succumbing to the prevailing wave of negativity that has engulfed the currency.
- Adding to its woes is the resurgent strength of the US dollar, which is flexing its muscles against nearly every other currency in the global arena.
- In this scenario, the British pound is no exception, and it seems to be poised for further downside.
As the market has witnessed a relentless wave of selling pressure in recent times, it's only natural to anticipate the emergence of buyers at some point. However, any such buying interest is likely to be short-lived. This market environment appears conducive to the "fade the rally" strategy, where attempts at recovery are met with skepticism. Ultimately, the consensus is building that this market is destined for lower levels, with the possibility of testing the 1.20 level and potentially even lower.
The 1.2350 level, which previously provided support, is now expected to act as a resistance due to the phenomenon known as "market memory." Consequently, we can anticipate significant turbulence if the price attempts to move toward that region. Nevertheless, recent price action suggests that the market is picking up pace to the downside, making it increasingly likely that we may not even witness an opportunity to approach the 1.2350 level.
Buying Sentiment Remains Subdued
A key area of interest on the downside is the 1.1850 level, which is gaining significance based on the weekly charts. Interest rate differentials between the US and the UK are poised to increasingly favor the US, given the recent interest rate decision by the Bank of England. Speculation is rife that the UK may adopt a more accommodative monetary policy stance. The European Union's growing signs of recession are also casting a shadow over the United Kingdom, a factor contributing to the bearish sentiment in the charts.
In the end, the British pound continues to grapple with a challenging environment, exacerbated by the strengthening US dollar. Market participants should be prepared for a resistance-turned-support battle at the 1.2350 level, although the prevailing momentum suggests an acceleration to the downside may be imminent. Interest rate dynamics favor the US, while economic concerns in the European Union are also weighing on the UK. Consequently, buying sentiment in this pair remains subdued, and any bounces are viewed with caution as potential opportunities for further downward movement.
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