GBP/USD Forecast: Pound Sitting Just Above Support

Christopher Lewis

If your short-term range-bound trader, this could be a good market for you.

The British pound has gone back and forth during the trading session on Thursday as we continue to test the support level underneath, in the form of the 1.30 handle. The market continues to be very noisy, but at this point, the question is whether or not we are trying to form some type of “double bottom”, or if we are ready to break down below the 1.30 handle.

On the downside, if we were to break down below the 1.30 handle, then we may grind towards the 1.28 level underneath there. There is a lot of noise in that 200 PIP range, so therefore it is likely to see a lot of downward pressure. Ultimately, this is a market that will have to make serious decisions rather soon, and as the Federal Reserve is very hawkish, that has been a bit of an anchor around the neck of the British pound itself. This is not necessarily an indictment on the pound, but more or less a sign of just how strong the US dollar is.

On the upside, the 1.32 handle is an area where we have seen a certain amount of resistance, and now that the 50 Day EMA is racing towards that level, it should offer a bit of a short-term ceiling.

All things being equal, we could just go sideways and try to carve out a 200 PIP trading range, and as we head into the weekend it is a bit difficult to think that somebody is going to jump out there and go “all in” for one currency or the other. The market is very noisy, but this is a major inflection point and therefore we need to see some type of impulsive candlestick in one direction or another to define a trend. The market has formed a couple of neutral candlesticks in a row, so that tells you just how confused we are, but it is also interesting to see the volatility has completely fallen off of a cliff. Now that is simply a matter of waiting to see when we get an explosive candlestick to follow. Between now and then, if your short-term range-bound trader, this could be a good market for you, but right now I am on the sidelines and waiting for clarity.

GBP/USD Chart

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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