- On Tuesday, the GBP/USD currency pair fell initially, hitting the 1.20 region.
- However, the currency saw a significant turnaround as the United Kingdom released Manufacturing PMI and Flash Services PMI figures, which were hotter than anticipated.
- This led to speculation about a potential resumption of tightening, which has provided some momentum for the pound.
British Pound in Consolidation Phase
The 50-Day EMA and 200-Day EMA are both flat, indicating consolidation rather than a clear trend. However, the 1.20 level is crucial, and traders will continue to monitor it closely. If the pound breaks down below this level, it could result in a move to the 1.1850 level, which has been tested before. If the market breaks below this swing low, it could open up the possibility of a drop to the 1.15 level, which has significant structural support.
On the other hand, if the market continues to rally, traders should pay attention to the shooting star from last week. If the market can break above the 1.2250 level, it is likely to move towards the 1.24 level, where a double top has previously formed. This area represents significant resistance, and traders should expect it to be fiercely contested. If the pound is able to break above the 1.24 level, it could extend to the 1.25 level, which would be a major victory for the currency.
Given the recent volatility, it is difficult to predict the pound's future movements with certainty. However, traders should keep a close eye on the UK's economic indicators, as well as any comments or actions from the Bank of England. Additionally, they should monitor the market's reaction to major news events, as these can have a significant impact on the currency.
In conclusion, while the British pound initially fell on Tuesday, it saw a significant rebound after the release of hotter-than-anticipated economic figures. Traders should monitor the 1.20 level closely, as well as the 50-Day EMA and 200-Day EMA. Additionally, they should pay attention to resistance levels at the 1.24 and 1.25 marks, as well as any major news events or economic indicators that could impact the currency's performance. One of the most obvious ones will be the FOMC Meeting Minutes coming out this week, as it could give us a bit of a “heads up” as to what was contemplated during the last monetary policy meeting coming out of the Federal Reserve. As far as the Bank of England is concerned, the rhetoric becomes more hawkish as time goes on.
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