- The GBP/USD has tried to break above the 1.23 level but gave back significant gains to show a bit of hesitation.
- The 200-Day EMA sits just below, I think that will eventually come into the picture.
- Ultimately, the market will try to look at that as a potential support level, if we break down below there then things could change. After all, markets do tend to overshoot and both directions.
Look at this chart, if we were to break down below there then I think we could have the 1.19 level come into the picture as a potential target. At this point, I think we got a situation where the market is trying to determine where it can go for the longer term because it certainly has been extraordinarily bullish. The market is also going to have to deal with the Federal Reserve meeting next week which will have a major influence on where we go next.
Pullback Coming Over the Next Couple of Days
On the other hand, if we were to turn around and go higher, then it’s likely that we could go to the 1.25 level, and quite frankly that is very possible since we have seen so much in the way out of momentum. More likely than not there are people out there wishing to take profit as we get closer to the crucial central bank meeting next week. If we do break down from here, it will make for a nice longer-term swing trade if the Federal Reserve convinces the market that we are going to remain tighter for longer, which is exactly what they have been trying to do.
The British pound is backed by a central bank that must deal with inflation, but it also has to deal with the fact that it anticipates a two-year recession coming, and that of course is not going to be a very good look in general. Ultimately, I don’t like the British pound in general, but I think this is a chart that is showing a bit of an indictment on the fact that we had gotten too far ahead of itself. With that being said, I think a pullback is coming over the next couple of days. Keep in mind that we are getting awfully close to the end of the year when liquidity starts to fall apart.
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