GBP/USD Forecast: Break Above 48-Hours of Resistance

Christopher Lewis

At this point, it is a market that is likely to see a lot of crushing downward pressure, but we are more or less chopping around trying to digest the gains in the US dollar over the past couple of weeks.

The British pound rallied a bit against the US dollar over the last 24 hours, breaking 48 hours’ worth of resistance. Now that we are back above the 1.34 handle, it will be interesting to see how this plays out. As we initially dipped below the 1.34 level, then it looks as if the market is likely to continue to favor downside trading, but we may have a little bit of noise to chew through. Because of this, I think that I am still going to be looking for signs of exhaustion that I can sell, because the US dollar has strengthened against most currencies quite rapidly.

If interest rates in the United States continue to spike, that will be a major driver of where we go next, meaning that we will have to keep one eye on the 10-year note while trading this pair, or for that matter anything involving the “USD” overall. Looking at this chart, if we break down below the lows of both Thursday and Friday of last week, then it opens up a significant selling opportunity to reach down towards the 1.30 handle. Obviously, that is a longer-term target, but I do think that it is very likely that we could go much lower. At this point in time, the 1.36 level both could be significant resistance, but if we were to break above there, then it could change a lot. At this point, any signs of exhaustion could be sold into, so I like the idea of shorting when we see signs of negativity.

The 50-day EMA broke down below the 200-day EMA signals a bit of a “death cross”, which means that the market is likely to continue to see longer-term selling, at least as far as higher time frames are concerned. At this point, it is a market that is likely to see a lot of crushing downward pressure, but we are more or less chopping around trying to digest the gains in the US dollar over the past couple of weeks. Given enough time, I do think that the trapdoor will open, especially if we continue to see yields rally the way they have been America. Beyond that, the Bank of England has remained very dovish.

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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