- The GBP/USD has rallied significantly during the trading session on Monday, as it looks like the 200-Day EMA is going to offer enough support to turn things around.
- Whether or not this is an actual recovery of the overall trend remains to be seen obviously, but right now it does look pretty good. It’s also worth noting that we have just broken above the top of an inverted hammer, so you do have the possibility of this bringing in more “FOMO trading.”
- Ultimately, it will be a situation where we need to get through some inflation noise before we get clarity, which has been lacking for a while.
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On the other hand, if we break down below the 1.2450 level, then it’s likely that we will send this market down to the 1.2350 level. All things being equal, I think this is a situation where it’s going to come down to expectations out of the Federal Reserve, and of course, we have the CPI numbers on Wednesday, so I think the upside is somewhat limited in the short term.
Given Enough Time We Probably See a Bit of Recovery.
However, the price action on Monday does suggest that perhaps we are going to try to turn around and try to recover. At this point, I believe that the 50-Day EMA, which is close to the 1.2650 level, could be a bit of a barrier. Ultimately, this is a good look for the British pound, so I do think that given enough time we probably see a bit of recovery.
If we break down below the lows of the last couple of days, that would be very negative, and I’d have to ask what the 1.2350 level would do for the market. It might just be a short-term bump along the way or a bigger move lower. I think a lot of this will come down to that holding. Anything underneath there would be drastically bad for the British pound, and we could go much lower. In that scenario, you would probably see the US dollar beating up on almost everything. I do think that we would have to get through Wednesday to make that happen, so we will see what the CPI numbers have in store for us because I will obviously have a major influence on where we go next.
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