The GBP/USD fell rather hard right out of the gate on Monday and looked as if it was going to start melting down. After all, there were a lot of traders in Asia that had no way to react to the noise coming out of the Federal Reserve speech. However, the reality is that the market has been negative for some time, and unlike the stock markets, currency markets have already been favoring the greenback.
Because of this, we have seen the market bounce a bit, and I think it sets up for a short-term rally. The short-term rally is going to be an opportune time to start selling yet again, to pick up “cheap US dollars.” After all, the US dollar is by far king, and it does make a lot of sense that we would continue to see a lot of people run toward it, especially considering that the Federal Reserve continues to behave hawkish, while the Bank of England has to worry about an upcoming recession. As long as that’s going to be the case, this market is going to be susceptible to selloffs, but we may have overextended ourselves, at least in the short term.
Rally Expected to Fade
- Rallies at this point should be sold into from what I can see, especially if we get somewhere near the 1.19 level, and then again at the 1.20 level.
- I will wait for signs of exhaustion to get involved, but I do believe that rallies should be thought of as potential opportunities.
- The US dollar is by far the favorite currency around the world, so anytime I can pick it up a little bit cheaper, I will not hesitate to do so.
The 50-Day EMA sits just above the 1.20 level and is dropping rather significantly. In other words, is coming into the picture and causing a bit of noise. If we get above there, then we could have a run to the 1.23 level, but right now I see it as a very unlikely outcome based on just how weak this market has been. At this point, I’m just looking for opportunities to start selling yet again. Yes, we have been falling for quite some time, but I suspect that we are just a little overdone in the short term. Again, I plan on taking advantage of this.
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