GBP/USD Forecast: Pound Continues to Show Supportive Action

Christopher Lewis

Volatility will almost certainly be a major issue, so make sure that you keep your position size relatively reasonable until we get a little bit of clarity when it comes to the inflation situation.

The British pound initially fell during trading on Friday to reach down towards the 1.37 level. That is an area which the 200-day EMA is starting to approach as well, so it should be relatively supportive based upon that also. At this point, the market has shown a proclivity to continue falling, but it is also worth noting that the market has seen a significant turnaround near the 1.36 handle.

Looking at this chart, you can see that we have been drifting lower for a while and I think that we could see a little bit of a barrier above, especially near the 50-day EMA. I think that is the real challenge, and if we can break above there then it is likely that we could continue to go looking towards the 1.40 handle above, which is a large, round, psychologically significant figure. That is an area that will attract a lot of attention, and if we were to break above there, then it would show a move to the upside, perhaps reaching towards the 1.42 level above, which is a major barrier that we have seen tested multiple times over the years. In fact, I think that there is a significant amount of selling pressure just waiting to happen in that general vicinity. If we were to break above there, then obviously it would be a major event for this pair.

On the other hand, if we were to drop below the 1.37 handle and the 200-day EMA, the market should continue to go much lower. At that point, it is almost certain that we would test the 1.35 handle which is a major round figure that a lot of people have been paying attention to. Another thing that you should pay close attention to is the 10-year note and yields. It looks as if the market is trying to grind higher, but it may take quite a bit of effort to clear a lot of the noise that we are hearing right now. Volatility will almost certainly be a major issue, so make sure that you keep your position size relatively reasonable until we get a little bit of clarity when it comes to the inflation situation.

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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