I think it is going to be “now or never” for this pair, and if we do not get some type of recovery in the next 24 hours or so, I think the threat of a significant breakdown is a very real.
The British pound has gotten hit again on Tuesday, and at this point it looks as if it is ready to give up all hope. Not sure exactly what that catalyst was, but one thing is for sure: we raced towards the 1.36 level rather happily. At this point, we are testing major support, so it will be interesting to see how this plays out. This is more than likely going to be a scenario where the buyers need to step in soon, or they might as well give up.
The US dollar came roaring back during the session against multiple currencies, not just the pound. In fact, this isn't even the worst-looking chart that I have seen today, as the Australian dollar clearly is in serious trouble suddenly. That being said, I do think that it is probably only a matter of time before the buyers come back in and try to pick this up. After all, we have recently seen a lot of choppy behavior and that is normally indicative of an attempt to change the overall trend. With the Bank of England likely to raise interest rates by the end of the year, this could bode well all along for this market.
To the downside, if the 1.35 level were to give way to selling pressure, that could be an extraordinarily negative turn of events. At that point, I would anticipate that the markets would start falling rather drastically, because the US dollar strengthening at rapid pace is like a wrecking ball for the world’s economy. At that point, the US dollar suddenly becomes the only game in town, and you would not only see the British pound suffer, but you would see all currencies do the same. This not necessarily what I am calling for, just something that you need to keep in the back of your mind in a market that looks like this. I think it is going to be “now or never” for this pair, and if we do not get some type of recovery in the next 24 hours or so, I think the threat of a significant breakdown is a very real. With this, I like the idea of buying dips, but not until we get some type of significant bounce.