- The GBP/USD has pulled back from the 1.15 level during the trading session on Wednesday, after having a very bullish bounce from the 1.05 level in very short order.
- A lot of this was noise coming out of the United Kingdom and a potential tax scheme that traders did not like.
- They walk that back, and we did get a bit of a bounce to wipe out all those losses.
However, when you look at this chart, you can see that the 50-Day EMA has offered a bit of a downtrend line, and therefore it’s likely that we will continue to see it respected. That’s exactly what happened on Wednesday, incongruence with the 1.15 level. The bounce had been far too strong, and far too quick. We simply ran out of momentum. The question is whether the market is ready to go much lower. Ultimately, the market is overdone, and it would not surprise me at all to see the market retest of 1.05 level underneath. That’s where we bounced from, but quite frankly a 1500-point jump in just a week is far too much to be sustainable.
Pair Likely to Continue Going Lower
However, when you look at the currency pair over the last year or so, it has been a steady grind lower, so I have much more faith in the candlestick on Wednesday than I do any of the others. If we were to break it down below the 1.05 level, then it’s likely that we will see this market drop all the way down to parity, and a lot of people are calling for that sometime later this year. I suspect that we are about to have a long, cold, dangerous winter and not only in the European Union but in the United Kingdom, and I think it is almost certainly going to continue to be priced into this market.
Furthermore, the Federal Reserve continues to tighten its monetary policy and is showing no proclivity to change that anytime soon. Because of this, I think the pair ultimately goes lower over the long term regardless of what people say, and I think the momentum is simply running out as one would expect. This was a rip-your-face off type of rally, but you get those occasionally in big bear markets. If we were to turn around and take out the 1.20 level, then I would be convinced that the overall trend has changed, but I just don’t see that happening.
Ready to trade our Forex trading predictions? Here are some excellent Forex brokers to choose from.