- The GBP/USD has been displaying some interesting behavior during the Monday trading session.
- After a slight pullback, the currency has shown signs of life, hovering between the 1.24 level and the 1.25 level.
- Despite the ugly massive candlestick on Friday, it appears that the market is trying to stay within the general vicinity of this area.
Shortly after the Empire State Manufacturing Index came out stronger than expected the bond rates in the USA rose, driving the value of the greenback against everything, including the British pound. Whether or not it holds, remains to be seen.
However, it is evident that this market needs to make a bigger move sooner or later. If we break down below the most recent swing low near the 1.2350 level, the market could drift down toward the 200-Day EMA that sits just below the 1.22 level. This means that the market is likely to be volatile, and traders need to be cautious about their position sizing. Nonetheless, there are still many traders interested in this market, so even if there is a breakdown, expect a lot of choppiness on the way down.
The Market is Expected to Continue to be Volatile
If we were to break above the highs of the Friday session, then the possibility of a move to the 1.2750 level opens. Breaking this level could allow the British pound to become a “buy-and-hold” asset, making it one of the better-performing currencies in the world this year. Nevertheless, traders need to be cautious with their position sizing as volatility remains a major issue.
It is worth noting that the recent bullish sentiment for the British pound has been largely driven by the country's success in rolling out COVID-19 vaccines. This has enabled the economy to open faster than many other countries, creating a positive outlook for the pound. However, this could change quickly, and traders should stay alert to any news that could impact the market.
All in all, the British pound is expected to continue to be a volatile market in the short term, but eventually, it will make a move one way or the other. Therefore, traders should continue to pay close attention to market movements and be cautious with their position sizing. The British pound may have a lot of upward momentum, but it also has significant downside risks.
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