- The GBP/USD continues to hang around the 1.20 Handel, an area that has been important multiple times in the past.
- Looking at the chart, we are sitting just above the 50-Day EMA, and just below the 200-Day EMA indicators, both of which traders pay quite a bit of attention to.
- Because of this, I think we continue to have more of a squeeze and more of a sideways action than anything else right now, with a high likelihood of less-than-thrilling trading. We are in an area of inflection, but we also are between two of the biggest holidays of the year.
Because of this, I think we got a situation where the market will more likely than not go sideways over the next week or so, and almost certainly will struggle to gain any traction until the bulk of the market comes back to work. That means we are probably looking at the Non-Farm Payroll report before we start to see the true market reassert itself.
There Are a Lot of Concerns About the Global Economy
It’s probably worth noting that there are a lot of concerns when it comes to the global economy, which typically favors the US dollar. With that, it’s very possible that we could see no real movement of significance for a minute. However, I do recognize that with this illiquid market, we could also get sudden moves that could cause a lot of damage to your account based on algorithms reacting to the news, in what would be thin trading. Because of this, you need to be very cautious this time of year.
All things being equal, I believe that we will probably continue to bounce around between the two moving averages, at least until we get some type of clarity. Once we do get a candlestick that shows real momentum, then it could lead to a much bigger move. In this type of situation, on a breakdown below the 50-Day EMA, we could be looking at 1.16 underneath as a potential target. On the other hand, if we turn around and break above the 1.25 level on a daily close, it opens the British pound to continue the recovery, perhaps sending the Sterling all the way to the 1.30 level over the next several months. I think we will learn a lot after the job number comes out in early January. Between now and then, expect a lot of nonsensical noise.
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