GBP/USD Forecast: British Pound Continues to Recover

Christopher Lewis

I think a short-term bounce makes the most sense, but a longer-term situation might be a completely different scenario.

The British pound has rallied significantly during the course of the trading session on Thursday as we are well above the 200 day EMA now, and looking very likely to continue strengthen. Ultimately, I think that this market will continue to see a lot of people jumping into it, as the British pound has now bounced significantly from the 200 day EMA. Because of that, the market is likely to see a lot of support underneath, as it looks like we are trying to sell off the greenback again.

We had previously looked almost certainly to go down to the 1.35 handle, but now it seems like we are closing out on the highs of the session during the day on Thursday, which almost certainly signifies that we should go a little bit higher given enough time. The market will eventually run out of steam, especially as we get closer to the 50 day EMA. A break above the 50 day EMA though, would be a very bullish sign and could send this market much higher. At that point, I would anticipate that the British pound could go looking towards the $1.40 level.

To the downside, if we were to turn around and fall below the 200 day EMA again, then it is very likely that we would see this market break down towards the $1.35 level, possibly opening up a move much lower than that. Breaking down below the $1.35 level will open up the possibility of a move all the way down to the 1.30 handle, which is a large, round, psychologically significant figure that will attract a lot of attention to say the least. Ultimately, this market will be volatile to say the least, but regardless this has been a bit of a nice recovery, and it is worth noting that the 200 day EMA has caught the attention of a lot of traders. If yields in America start to rise again, that would show that perhaps people are getting away from the bond market again, and therefore away from the greenback in general. I think a short-term bounce makes the most sense, but a longer-term situation might be a completely different scenario.

GBP/USD

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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