The GBP/USD rallied a bit during the trading session on Tuesday as we continue to see a lot of volatility. It’s obvious that the US dollar continues to be the strongest currency in the world, so it does make a lot of sense that we would see a failure to continue going higher. The shape of the candlestick is of course an inverted hammer, so that will attract a lot of attention in and of itself.
If we were to break above the top of the inverted hammer, that would be very bullish, but I think the upside is limited. After all, the Federal Reserve is very tight with its monetary policy, and we must look at this through the prism of relativism. The Bank of England can do very little when it comes to monetary policy because even though there is a lot of inflation in the United Kingdom, we are watching that economy drift into recession. In fact, the central bank is already stated that they fully anticipate one.
Look for Opportunities to Pick Up Dollars
- In other words, rallies at this point continue to offer selling opportunities, as the US dollar continues to be a currency that you want to hold.
- The market will continue to see a lot of choppy behavior, but anytime you get the opportunity to pick up “cheap US dollars”, you probably should. This is going to continue to be the case going forward as the Federal Reserve remains extraordinarily tight.
- If that continues to be a scenario where we see a lot of value hunting, I look at any rally as an opportunity. I think that given enough time; we should see the trend continue. The 50-Day EMA sits just below the 1.20 level and is starting to raise to the downside.
The 50-Day EMA has been very impressive as far as dynamic resistance is concerned for a while, and I think that continues to be the case. We are more likely than not going to see the market fail long before he gets there, but that for me and said being the short-term “ceiling in the market.” The market breaking down below the lungs of the Monday session opens a move down to the 1.14 level, and perhaps even lower than that. We are at extreme lows, so keep that in mind.
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