GBP/USD Forecast: Pound Gives Up Early Gains Again

Christopher Lewis

It is not until we break above the 1.36 level above that I would be a buyer of this market, because we need to break structure before I become bullish of the British pound.

The British pound initially rallied on Tuesday but has given up gains yet again to go falling towards the 1.34 handle. The US dollar has been like a wrecking ball against almost everything during the session, and the British pound of course would be no different. By giving up the gains the way we have, it does suggest that the market is likely to continue drifting lower, and once we get below the 1.34 handle, I think there would be even more selling pressure just waiting to happen.

At this point, the market would go looking towards the lows again, near the 1.3350 handle. The market breaking down below that level should open up the possibility of a much bigger move, reaching down towards the 1.30 handle. We are in a major downtrend, breaking down over here just as we have seen with the euro. The 50-day EMA as broken below the 200-day EMA again, forming the so-called “death cross” over the last couple of weeks. I do believe that the overall downward pressure will continue to be a major issue, and as a result I think it is only a matter of time before the acceleration picks back up.

Keep in mind that the Bank of England is rather dovish, while the Federal Reserve is one of the few central banks that are looking to tighten at this point, as we are expecting the Federal Reserve to continue tapering the bond market, which is tantamount to tightening. With this being the case, the market is likely to continue to see rallies sold into, and I will start shorting the British pound yet again every time we show signs of weakness on shorter-term charts.

It is not until we break above the 1.36 level above that I would be a buyer of this market, because we need to break structure before I become bullish of the British pound. As I look across the Forex markets, the one common denominator that I see is the US dollar strengthening. That being the case, it is very unlikely that we will see this market rally for anything more than a short-term blip. The market is likely to continue to be very noisy, but the most obvious direction is down.

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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