- The GBP/USD rallied early on Thursday, breaking above the 1.23 level. However, this level is an area that begins the cluster forming the double top at the 1.24 level.
- This suggests that there will likely be significant resistance just above, making it sensible to give up some of the gains.
- The Federal Reserve continues to raise rates and has reiterated that they will remain tight going forward, even if it means continuing to tighten interest rates.
Looking at the chart, it seems that the market is a little overextended, and the fact that it gave back some of the gains suggests that it may be ready to start pulling back toward the US dollar. On the other hand, if the market breaks above the double top at the 1.24 level, it will challenge the psychologically and structurally important 1.25 level. This would cause the British pound to take off to the upside, potentially leading to a significant move higher.
The Market Looks a Little Heavy
If the market breaks down from the current level, the 1.20 level underneath would be a significant victory for the US dollar. This level has been a magnet for prices over the past several months, suggesting that there will be a bit of a fight in that area if the market gets down to it. Anything under the 1.20 level would threaten a move down to the 1.1850 level, which was previously major support. Breaking below this level would open up a trapdoor for falling prices.
Overall, the market looks a little heavy, and there may be opportunities to short over the next several days. The current situation with the British pound highlights the importance of monitoring market trends and adjusting investment strategies accordingly. The market can be volatile, and investors must be prepared for potential losses while seeking opportunities for gains. Keeping an eye on economic indicators and global events can help you make better decisions and keep an eye on risk. That being said, position sizing will be crucial, but it certainly looks as if we are getting a little ahead of ourselves so I would anticipate some type of short-term pullback sooner or later. That being said, it will come down to the latest narrative, because the markets are starting to move on rumors more than anything else.
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