- The GBP/USD fell initially during the trading session on Wednesday to dip below the 1.15 level.
- By doing so, the market looked as if it was going to fall apart, but we turned around to show signs of life.
- By the end of the day, the British pound ended up forming a bit of a hammer, which of course is a slightly bullish sign.
Having said that, the previous candlestick was an inverted candlestick, and now it looks as if the market is trying to figure out which way to go in general. After all, we have conflicting candlesticks and that shows just how choppy this market is going to be. The 1.15 level is a large, round, psychologically significant figure, and an area that looks like the market is going to continue to fight around.
Pound Likely to Continue Losing Ground
Keep in mind that the US dollar was a bit overdone, so would not be a huge surprise at all to see a little bit of accumulation, or perhaps even a short-term bounce that we can sell into. If we do see a bounce and signs of exhaustion, then I will be shorting this market as there is a lot of negativities when it comes to the British pound, and of course, the Federal Reserve will continue to tighten its monetary policy. Markets don’t move in one direction forever, so does make a lot of sense that we will get a bounce.
The 50-Day EMA sits just below the 1.20 level, and it looks as if it is going to continue to drop to offer dynamic resistance. This may or may not be challenged, because the 1.1750 level could also end up being rather resistive on any type of bounce. Ultimately, this is a market that I think continues to see the US dollar as an asset that is worth owning, especially when you compare it to the other currencies coming out of the European region. After all, the United Kingdom will have to worry about a recession and a lack of energy through the winter. Markets don’t go in one direction forever, so it does make sense that we get a little bit of a relief rally. That relief rally is something that I am more than willing to start shorting.
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