- The GBP/USD has experienced a notable decline in recent days, with Wednesday following the downward trend.
- Current market conditions suggest a potential decline towards the 1.20 level, possibly extending to the 1.1850 level in the long term.
- It is prudent to consider every rally as a potential selling opportunity, with the 1.2350 level above expected to offer substantial resistance, a trend observed in past market behaviors.
Moreover, the market is on the brink of witnessing a “death cross,” a scenario where the 50-day EMA falls below the 200-day EMA. However, the market seems to be overextended, indicating the possibility of interim bounces, which are likely to present additional selling opportunities.
The continuous ascent of interest rates in America, particularly on the short end of the yield curve, is rendering T-bills and other US-denominated markets increasingly attractive. This scenario is likely to see the British pound continue its struggle against the US dollar. A bounce is anticipated, providing an opportunity for selling into the market. A direct drop to the 1.1850 level would necessitate a major crash, a less likely scenario given the orderly nature of currency markets and the substantial decline already witnessed.
Investors Should Be Cautious
The market would need to break above the 1.2350 level to shift to a bullish stance, necessitating a reevaluation of the entire situation before considering investments in the British pound. The pound's significant decline against the Japanese yen, generally considered a weaker currency, underscores the challenges faced by the pound in the current market landscape.
The British pound is navigating through turbulent waters, with significant declines and potential further downward movements. The market is poised for a “death cross,” and interim bounces are likely to be short-lived, presenting more selling opportunities. The rising interest rates in the US are making its markets more attractive, putting additional pressure on the British pound.
Investors and traders should approach this market with caution, focusing on strategic selling positions and closely monitoring market movements and trends. After all, it’s all about the US dollar at the moment, and the GBP will simply be a victim of the overall market conditions. The Pound continues to get sold off, but it's overdone. I will be looking to fade short-term rallies as an opportunity to pick up “cheap US dollars” going forward. I have no real interest in buying now.
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