The British pound has fallen to test the 1.31 level again during the trading session on Thursday as we continue to see a lot of negativity in the markets overall. The US dollar is being favored as a safety asset, which does make quite a bit of sense considering everything that is going on. Furthermore, we had seen a bit of an increase in rates in the United States, so that does make the US dollar bit more attractive.
With this being said, it is a simple continuation of the overall downward pressure that we have seen for some time, so I think this makes quite a bit of sense. Quite frankly, I had anticipated that the British pound might recover a bit more before selling off, but nonetheless, there was only one direction to trade this currency to begin with. With that being said, on a break to a fresh, new low, I anticipate that more selling pressure will appear and that we will go looking towards the 1.30 handle. That of course is an area that will have a certain amount of psychology attached to it, as well as previous price action that makes it a bit interesting.
If we were to break down below the 1.30 handle, then it is likely that the market goes lower, perhaps reaching as low as the 1.28 handle. I think there is a lot of fear-based trading out there, and with that being the case it is likely that the US dollar will continue to attract plenty of attention. After all, we have a war on the steps of the European Union, a global slowdown, and major concerns when it comes to inflation. As the world seemingly looks like it is at the beginning of a new Cold War, things could get very interesting to very quickly.
I still look to fade rallies but would love to have seen a bigger rally. Regardless, there is only one direction you can trade this market but as far as a decent entry signal, you just look for long wicks on short-term charts on the top of candlesticks. If yields continue to climb in the United States, that of course will be bearish for this market. Furthermore, we have the Federal Reserve meeting next week that will be closely watched that could be the next catalyst.
