GBP/USD Forecast: Pound Struggles to Recover the 1.35 Level

Christopher Lewis

I still favor fading these rallies as they occur after the previous two massive red candles that formed this week. It shows impulsivity to the downside after all.

The British pound has rallied initially during the trading session on Thursday to reach towards the 1.35 handle. The market has given back a bit of the strength in order to form a less than impressive candlestick. The market is likely to continue to go lower, especially if we break down below the lows of the Thursday session. That could open up a move down to the 1.30 250 level, and then possibly even the 1.30 handle.

I do believe that the 1.30 handle is going to end up being rather important, and therefore the market will see a certain amount of support in that area and value hunting. That is my longer-term target now that we have broken through major support at the 1.36 handle, and of course the bottom of the overall descending triangle that we had seen form for quite some time. That suggests to me that we have further to go, and the fact that we gave back quite a bit against during the trading session on Thursday late on the day suggests to me that it is very possible and/or likely that it continues to wilt.

To the upside, we would need to recapture the 200 day EMA in order to get long, but I do not see that being very likely. If it does get recaptured, then obviously it would be worth looking into a long position as it would be a major sign of momentum shifting. That being said, when you look at the 200 day EMA you can see that the 50 day EMA is starting to slope towards it, and it does in fact suggest that perhaps the market is ready to form the so-called “death cross”, which is a negative longer-term signal that attracts quite a bit of attention. Nonetheless, the US dollar continues to be the strongest G 10 currency at the moment, and I do think that continues to be the case going forward. As yields rise in America, it drives up the demand for the greenback. The market will more than likely continue to be noisy, but I still favor fading these rallies as they occur after the previous two massive red candles that formed this week. It shows impulsivity to the downside after all.

GBP/USD

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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