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GBP/USD Forecast - Thursday's Shooting Star Suggests a Coming Fall: Big Drop if $1.1850 Breaks Down

We have recently seen a nice rally in multiple currencies against the US dollar, but that seems to be a situation where it was a relief rally more than anything else.

  • The GBP/USD has gone back and forth during the trading session on Friday as we hover around a couple of moving averages.
  • Ultimately, the market seems as if it is looking for some type of directionality, but I would also point out the fact that the market has no real idea what it wants to do, but it is starting to at least whisper the idea that the British pound is going to start falling.
  • After all, the candlestick from the trading session on Thursday is a bit of a shooting star right at that moving average, so does make a certain amount of sense that we would see hesitation.

If we were to break above the top of the candlestick from Thursday, it opens the possibility of a move to the 1.24 area, an area that has offered a significant amount of resistance. Above there, the 1.25 level then is even more resistive, as we have formed a bit of a double top. That is an area that I think is going to be extraordinarily difficult to break above, and therefore if we were to clear that area, it would be an extraordinarily bullish sign for traders going forward.

Noise Favors the US Dollar

On the other hand, if we break down below the hammer from the Tuesday session, we could very well challenge the British pound and go much lower. The market has been very noisy in general, but I think that works in the favor of the US dollar, as we have seen so much in the way of concern, and that concern of course is something that has people looking for safety. If we break down below the 1.1850 level, it’s probably completely over for the British pound and I think we go much, much lower.

We have recently seen a nice rally in multiple currencies against the US dollar, but that seems to be a situation where it was a relief rally more than anything else. I do believe that we have a lot of headwinds out there when it comes to the global economy, and therefore it does make sense to see this pullback. Whether or not we break down below the bottom is still up for debate, but that is something I will be paying close attention to, to say the least.


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Christopher Lewis
About Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.


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