GBP/USD Forecast: Pound Succumbs to US Dollar Strength

Christopher Lewis

I would anticipate a lot of choppy behavior of the next couple of days, but it seems like we prefer the downside more than anything else at this point.

The British pound got absolutely crushed during the trading session on Thursday as the US retail sales came out much stronger than anticipated. This had everybody driving towards the greenback overall, putting bearish pressure on the British pound. The 50 day EMA is slicing through the candlestick, and that of course suggests quite a bit of negativity as well. The candlestick from a couple of days ago formed a shooting star, and that of course suggests selling pressure as well. With that being the case, I think the market is also paying close attention to the downtrend line that I have drawn on the chart, so it all comes together for more negativity.

You should also keep in the back of your mind that the 200 day EMA is currently sitting at the 1.37 handle, which is the next natural support level. I think that we are trying to get down to the area in order to test major support. If we break down below the 1.37 handle, then the market should show a certain amount of support all the way down to the 1.36 handle. Breaking that would be a major breach of support, opening up massive amount of bearish pressure to send this market much lower.

This is a market that if we were to turn around and break above the top of the shooting star from a couple of days ago, would show a massive amount of bullish pressure to send this market looking towards the 1.40 handle. The 1.40 handle has been important more than once, and therefore if we were to break above there the market would go looking towards much higher levels. Keep in mind that the market has a major “W pattern” forming if we do break to the upside. The last couple of days certainly put a bit of a dent in the overall potential bullishness of this market. Now it comes down to whether or not we can slice through that massive double bottom underneath. I would anticipate a lot of choppy behavior of the next couple of days, but it seems like we prefer the downside more than anything else at this point. The volatility will continue to be a major factor in this market but the last couple of days certainly have shown a lack of momentum.

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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