GBP/USD has pulled back from the 50-Day EMA yet again on Tuesday, mirroring what we did on Monday. I
- t is very likely that we should continue to see a lot of noisy behavior, and I think that does favor the US dollar.
- The 1.15 level above is an area that is a large, round, psychologically significant figure, and will attract a lot of attention.
- Because of this, I think we got a situation where we are finally running into a bit of trouble, and therefore it does make a certain amount of sense that we continue the longer term downtrend.
- I do think it is probably only a matter of time before the sellers come in and overrun everything.
Pay attention to market behavior
The 1.10 level underneath should be supported, and therefore I think we’ve got a situation where that could be a nice target for the short term. Whether or not we can break down below there is an open question but considering all of the issues in the United Kingdom and the fact that even emerging market traders are starting to jump on the pound, it’s likely that we will eventually see quite a bit of downward pressure.
If we are going to break down below the 1.10 level, then it’s likely that the market goes down to the 1.05 level. The 1.05 level is an area that has been important previously as we had bounced from that level, and therefore I think it’s more likely than not going to be tested. If we can break down below there, then it opens up the possibility of a move down to the parity level. Obviously, that would be a major event that would attract a lot of attention, so therefore you need to pay close attention to how the market behave as if we ever get down there.
On the other hand, if we break above the 1.16 level, then it’s likely that we could go looking for the 1.20 level. That would obviously be a very strong turn of events, but I think ultimately we’ve got a situation where the budget situations in the United Kingdom and of course the fact that the Federal Reserve is tightening monetary policy will continue to attract sellers in this market every time we do get a short-term rally.
Ready to trade our daily Forex forecast? Here’s a list of some of the best Forex trading platforms to check out.
