- The GBP/USD has fallen yet again during the day on Friday, after initially trying to recover a bed.
- Most currencies struggled late in the day against the United States dollar, and of course Sterling was never going to be any different as it is by far one of the weakest currencies that I follow.
- With the Bank of England already admitting defeat and recognizing that a recession is coming this year, it does make a lot of sense of people do not want the British pound.
On the other side of the Atlantic Ocean, you have the Federal Reserve tightening interest rates, and seemingly able to do so aggressively. If there is a lot of inflation in the United States, that will probably be the dynamic that we are working with. The $1.15 level course is a large psychological barrier, and an area we had bounced from quite drastically the last time we approached it. I do think that a recovery rally is going to happen sooner or later, and I am the first to admit that I was quite surprised when it didn’t stick on Friday.
Looking to Fade Rallies
This is not to say that I have any interest whatsoever in bombing the British pound, just that I don’t necessarily want to chase the trade all the way down here. Friday was extraordinarily volatile, mainly due to a lack of liquidity. Monday will be more of the same since it is Labor Day and the United States, a major holiday and that means a lot of the large players will not be in the market. However, as big players come back from holiday, we should see liquidity picked up quite a bit this week, and that of course next week. There is nothing that says “risk on” on any of the charts I follow, most certainly not this one.
Rallies at this point will see the 1.20 level as a major resistance barrier, one that we probably cannot get beyond anytime soon. With that being the case, I think we have a “fade the rally” type of set up every time we do arise from here. Underneath the will .15 level I can only assume that the one for level would be the next target, because at that point we are going in so far back in history there’s not a whole lot to guide you from a technical analysis perspective.
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