The GBP/USD has fallen during the trading session on Tuesday as we continue to see overall selling pressure. At this point, it’s very difficult to imagine a scenario where you would want to step in and pick this currency up, especially as we continue to see the bank of England act in a very erratic manner. Now we are talking about quantitative tightening completely disappearing, so that opens up the door for massive devaluation of the currency, although we have already seen that this year.
The 50-Day EMA sits just above, and it should offer a significant amount of dynamic resistance and could be thought of as a “short-term ceiling.” If we were to break above there, then the 1.15 level then comes into the picture, which of course is a large, round, psychologically significant figure and an area where we had seen support previously. The market will continue to see a lot of volatility, but quite frankly the US dollar is by far the strongest currency at the world, and it’s likely that we see continued strength in the greenback. I just don’t see a situation where things change anytime soon, and with this being the case it’s likely that interest rates will be followed closely also.
Underneath, the 1.10 level should offer support, and could be a short-term target. Either way, I don’t have any interest in trying to get too cute in this market, because I do believe that the downtrend is firmly ensconced and the lack of growth around the world will continue to be a major issue, forcing more traders to pick up US dollars.
At this point in time I think the only thing you can probably count on is going to be a lot of volatility, so keep your position size reasonable but it’s clear at this point in time that the downtrend is going to continue to be the way forward. If we do break down below the 1.10 level, then it’s very likely we go looking toward the 1.05 level, an area that had been massive support previously and where we had bounced from to begin with. As long as we have so much negativity out there, the US dollar will continue to be the place to be overall and I don’t think that changing anytime soon.
