- The GBP/USD rallied again during the trading session on Friday, as we are now above the 1.18 level.
- At this point, it looks as if the British pound is looking to the 1.20 level above, and the 200-Day EMA sits just above there.
- With all that being said, we may have a little bit more to go to the upside, as traders are trying to do everything, they can base the trade on the possibility of the United States cutting rates.
- That of course is ridiculous, but at the end of the day, it is market perception more than anything else that has this thing moving.
The reality of course isn’t like that, and I do think that it is probably only a matter of time before we would see the Federal Reserve do everything it can to push risk appetite back down. After all, the higher the risk appetite-related assets go, the more inflation you are more likely not going to see. There are a couple of very strong green candlesticks in a row that the market is looking at, and it’s probably worth noting that the market was comfortable shorting the US dollar into the weekend.
I don’t necessarily think this is a situation that has legs, but if we break above the 200-Day EMA, you must look at it as a serious trend change. I think it’s a lot to think that the Fed is suddenly going to become loose with its monetary policy, but everybody is jumping into the market all at once to press the issue. This will only offer “cheap US dollars”, which I am more than willing to take advantage of. However, you need to let the market do its own thing and times like this are extraordinarily dangerous. With that being the case, I’m on the sidelines but I’m waiting for the exhaustion candle to get involved. Again, if we were to take off and shoot above the 200-Day EMA, then it’s possible that we could see the market go much higher, perhaps even changing the trend but I think we need some type of fundamental reason to do that. The 1.15 level would almost certainly offer support, and if we break down below there, then the floodgates could open to the downside.
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