GBP/USD Forecast: Pull Back from 50-Day EMA

The British pound continues to struggle with the 50 day EMA as you can see that we have seen the 50 day EMA offer quite a bit of selling pressure over the last three or four days. We touched it initially during the trading session and then turned around to break down towards the lows of the previous session. If we break down below the lows of the previous session, that would be a negative sign and could send this market down towards the 200 day EMA.

The 200 day EMA sits just above the 1.37 level, which is also an area of support as you can see and therefore if the market were to go down to that area, I would anticipate that there should be a bit of a fight on our hands. If we break down below the 1.37 handle, then it is likely that we would go looking towards the 1.36 level initially where we had bounced from, and then the 1.35 handle underneath which has been important multiple times over the last several years.

To the upside, if we were to turn around and break above the 50 day EMA, then it is possible that the market could go looking towards the 1.40 handle above, which is a large, round, psychologically significant figure. That of course is an area that would attract a certain amount of headline attention, as it is a large figure. That also keeps the idea of more choppy consolidation, but only if we get above that 50 day EMA. Nonetheless, the market is likely to see a push lower than higher, simply because we continue to see the US dollar strengthened overall. The 10 year yield is the chart you should be paying the most attention to, mainly due to the fact that it has been the biggest driver of the greenback in general.

If we look at this chart from a longer-term standpoint, breaking down below the 1.35 handle would be catastrophic and could send this market much lower. In general, rally should be sold into but keep in mind that there will be the occasional hiccup along the way. As we head into the weekend, I anticipate that there will be more or less a “risk off” attitude that could also weigh upon this market.