- The GBP/USD embarked on a rallying journey during the initial stages of Thursday's trading session, although the landscape remains marred by considerable volatility.
- In this tumultuous terrain, a bearish flag pattern takes shape, with the underlying uptrend line emerging as a critical support level.
- A breach of this trendline could unleash substantial selling pressure, propelling the British pound towards the 1.20 level in rapid succession.
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Should the market descend below the 1.20 level, it would signify a perilous trajectory for the British pound, signaling exceptional strength in the US dollar. The 1.1850 level looms below as another formidable support zone, having played this role on multiple occasions in the past. Anything beneath this level would plunge the British pound into dire straits.
Global traders are currently engaged in a delicate balancing act, attempting to decipher the Federal Reserve's stance on monetary policy. Their hopes are pinned on the central bank's willingness to maintain loose monetary policy. Furthermore, the upcoming jobs report scheduled for release on Friday is poised to dominate headlines, potentially influencing the Federal Reserve's course of action.
The 50-Day Exponential Moving Average sits above the market, serving as a substantial resistance barrier. Remarkably, this level aligns neatly with the upper boundary of the bearish flag pattern. The declining trajectory of the 50-Day EMA may mean that reaching this area during a rally is a formidable task.
Looking to Fade Rallies
In the event of a breakout above the 50-Day EMA, the 1.2350 level warrants close scrutiny. Surpassing this threshold would open the door to the possibility of a bullish surge, potentially driving prices significantly higher. While such a scenario may not materialize easily, it remains a prospect that warrants monitoring.
My prevailing inclination is to fade rallies, implying a preference for short positions. I currently harbor no interest in holding the British pound. Conversely, I find myself disinclined to short the US dollar. The overall market sentiment continues to skew bearish, and I anticipate that this will be confirmed once the dust settles post-Friday.
Ultimately, the British pound embarked on a rallying endeavor in Thursday's session, set against a backdrop of pronounced volatility. The bearish flag pattern remains a defining feature, with the uptrend line beneath serving as a critical support. The market's future trajectory hinges on multiple variables, including the Federal Reserve's stance and the impending jobs report. The 50-Day EMA looms above as a substantial resistance level, and a breakout above this point may usher in a different market dynamic. For now, my strategy centers on fading rallies, reflecting the persistently bearish outlook.
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