GBP/USD Forecast: Sterling Shows Downward Pressure

Christopher Lewis

I’m looking for short-term rallies that I can take advantage of, to pick up value in the US dollar when we get an opportunity.

The GBP/USD pair initially tried to rally during the training session on Thursday but get back gain as we continue to see a lot of negativity. Furthermore, the CPI numbers coming out of the United States on Friday will certainly have a major influence on what happens with the greenback, and it looks is that the bond markets are trying to price the idea of a hotter than expected inflationary number. If that’s going to be the case, then it makes quite a bit of sense that the US dollar will continue to strengthen.

While we have not broken it down completely, it is worth noting that rallies continue to get sold into. If we break down below the lows of the Tuesday session, it almost certainly will send this market down to the 1.24 level, possibly even down to the 1.22 level. I do think that it is probably a scenario where we have more of a “sell the rallies” type of situation unless, of course, something changes completely.

If the CPI numbers come out lower than anticipated, that could cause a bit of a turnaround, but we also have a lot of resistance near the 1.26 level that extends to the 1.2650 level, where the 50 Day EMA sits and is going lower.

I believe at this point we have a situation where the British pound will have to prove itself, so unless it’s an absolutely astonishing number during the day on Friday, I just don’t see how this market changes the trend. Even if we were to break above the 50 Day EMA, the ceiling in the market is probably at the 1.30 level as there is such an obvious selloff at that point and by extension, quite a bit of supply. Breaking above that would be what it would take to change the overall trend of this market, something that I’m not anticipating seeing anytime soon. Because of this, I’m looking for short-term rallies that I can take advantage of, to pick up value in the US dollar when we get an opportunity. However, if we get a massive rally on Friday, then we need to look for signs of exhaustion unless of course we get that break out in daily close above the 50 Day EMA. Ultimately, this is a market that had shown quite a bit of exhaustion.

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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