- The GBP/USD currency pair started the week by gapping up and surging higher.
- The market even managed to pierce the 200-Day EMA before encountering resistance at the 1.2150 level.
- However, the US dollar continues to show positive pressure due to the Federal Reserve's likely tight monetary policy, leading to an overall negative outlook for the pound.
The Pound Find It Dificult to Appreciate
The candlestick formation appears to be a shooting star pattern, with the 200-Day EMA acting as a barrier. This market seems poised to continue drifting lower, potentially reaching down to the 1.1850 level. Breaking down below that level could trigger a massive selling move, with the possibility of the pound going down to the 1.15 handle. However, this area has previously shown significant resistance, making it difficult to break through.
On the other hand, if the pound manages to break above the 1.2150 level, it could go up to the 1.23 level, and then to the 1.24 level. However, the 1.24 level has previously been a substantial resistance point, with a massive double top forming in that region. It seems unlikely that the pound will surpass this level and reach the 1.25 mark in the near future. Consequently, traders should focus on fading rallies as they occur in this pair.
The US dollar's strength is primarily due to the Federal Reserve's monetary policy, which is likely to remain tight for an extended period. Meanwhile, there are questions about how long this policy will continue. These factors contribute to a negative outlook for the pound, making it difficult for the currency to appreciate. That being said, the market is likely to continue to see more influence from the US dollar in the short term that it will from the British pound.
The British pound started the week with a gap up and surged higher, but it still faces resistance at the 1.2150 level. The market seems poised to continue drifting lower, potentially reaching the 1.1850 level. Breaking down below this level could trigger a massive selling move, while breaking above the 1.2150 level could result in a move up to the 1.23 level. However, traders should keep in mind the significant resistance at the 1.24 level and focus on fading rallies in this pair. Ultimately, keeping a close eye on the Federal Reserve's monetary policy decisions, and perhaps more importantly - comments can provide insight into the pound's future performance.
Ready to trade our daily Forex forecast? Here’s a list of some of the best regulated forex brokers UK to check out.