The GBP/USD initially tried to rally during the trading session on Tuesday but eventually showed signs of hesitation. The market is attempting to build up enough pressure to go lower and break down below the support. Every time the market gets close to the 50-Day EMA, it fails, making it more likely that traders will continue fading the rally and taking advantage of the US dollar strength.
- The 50-Day EMA is also supported by the 200-Day EMA, which means that several different players will look to short this market every time it tries to rally.
- If the market breaks down below the 1.1850 level, it is likely to drop down to the 1.15 level.
- This is a large, round, psychologically significant figure and an area where we have seen a lot of noise previously.
- The previous resistance should now end up being supported.
On the other hand, if the market turns around and takes out the 200-Day EMA, it could go up to the 1.23 level. After that, we have the 1.25 level above, where we have the double top that started at the 1.24 level. Although the market continues to see a lot of noisy behavior, it also has a major overhang, which makes it difficult for it to go much higher. The Federal Reserve's tighter monetary policy will likely keep the US dollar strong, adding to the downward pressure on each rally.
Although support has held fairly well so far, it is only a matter of time before it gives way to all of the mounting pressure. Because of this, I don’t really see the possibility of buying Sterling at the moment, at least not against the greenback.
In conclusion, the British pound initially tried to rally during the trading session on Tuesday but eventually showed signs of hesitation. The market is attempting to build up enough pressure to go lower and break down below the support. Every time the market gets close to the 50-Day EMA, it fails, and traders will continue fading the rally and taking advantage of the US dollar strength. The Federal Reserve's tighter monetary policy will likely keep the US dollar strong, adding to the downward pressure on each rally. Therefore, it is my intent to fade each rally at the first signs of exhaustion.
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