The GBP/USD has been showing signs of strength recently, rallying significantly during the trading session on Friday to break above the 1.20 level and test the 50-Day EMA. However, this may be a decent selling opportunity for traders, as signs of exhaustion may appear on short-term charts.
While the recent bounce in the pound has been important, the global economy is starting to show serious signs of cracking. This may draw up the value of the US dollar eventually, making it difficult for the pound to sustain its current levels.
Looking ahead, the 200-Day EMA is the next major level to watch. If the pound breaks above this level, it could open the possibility of a run to the top of a shooting star around the 1.23 level, and even potentially as high as 1.24. However, it is unlikely to happen anytime soon due to the palpable fear in the market.
Powell’s Remarks Could Aid the Dollar
- Negative headlines such as inflation, trouble in some of the US banks, supply chain issues, and geopolitical concerns have caused fear in the market. As a result, traders may want to fade the British pound and avoid buying it for now.
- After all, the United States dollar tends to be thought of as a safety asset, and safety is something that people will be looking for.
- The pair recently had been grinding lower in a channel, and we have not broken out of it yet.
The jobs report has added to the noise in the market, making it challenging to predict how the pound will perform in the short term. However, Jerome Powell's recent remarks about raising interest rates could lead to a stronger US dollar, making it more difficult for the pound to maintain its current levels. Ultimately, the Federal Reserve is going to be much more aggressive than many other central banks around the world, and at the end of the day, that might be the biggest driver of where the price goes.
While the recent rally in the British pound has been impressive, traders may want to be cautious and look for signs of exhaustion before considering buying. The global economy is showing signs of weakness, and the US dollar could strengthen, making it more challenging for the pound to sustain its current levels. I believe that given enough time, we will test the loads again, and then perhaps down to the 1.15 level under.
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