The GBP/USD currency pair initially tried to rally Wednesday but gave back gains as we continue to see the 1.20 level offers a significant amount of noise. The 1.20 level is an area that is has been important several times, and now I think at this point the “market memory” continues to show its importance here. The area previously had been supported, and now it looks as if it is going to be resistance.
The shooting star for the trading session does suggest that we have further downside, and it’s likely that we go looking to the 1.18 level after that. If we break down below the 1.18 level, then the market falls apart, perhaps reaching down to the 1.16 level. The 1.16 level opens up the possibility of a move down to the 1.15 handle.
While this market has been sold off quite drastically, it looks as if the short-term recovery has already rolled over. At this point, even if we break above the heights of the last couple of days, then the 1.22 level could be targeted. That area also has the 50-Day EMA hanging about, so it does make a certain amount of sense that we would see dynamic resistance. Because of this, I think the market will find plenty of reasons to go lower, and short-term rallies continue to offer shorting opportunities.
The market continues to see a lot of volatility, and typically when you have volatility is likely that you will see downward momentum. After all, the market is likely to see this pair show plenty of negativity going forward as there is a huge concern when it comes to the idea of global markets and global growth, and that has people looking to the US dollar for safety. I think that will continue to be the case, regardless of any type of significant recovery. In fact, it’s not until we break above the 1.24 level that you could have a serious conversation about the idea of the market changing its overall attitude. Beyond that, you probably need to see the Federal Reserve change its attitude in order to think this is actually going to happen. The shape of the candlestick certainly suggests that the buyers have a significant uphill battle.
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