- The British pound has been somewhat noisy during the trading session, as we initially dropped to, only to turn around and show signs of life again.
- Ultimately, this is a market that I think will eventually try to break higher and reach the 1.28 level.
- However, it is worth noting that CPI numbers are coming out of the United Kingdom on Wednesday, and that will have a major influence on what happens next.
With this being the case, I think you've got a situation where traders continue to see this as a market that is probably more or less short term base than anything else. So I think you have to be extraordinarily cautious. With that being said, position sizing will be crucial as you could find a bit of trouble if you get overextended.
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What if we drop?
If we do break down below the 1.2650 level, then it opens up a move down to the 50 day EMA. Possibly even the 200 day EMA. If we were to break above the 1.28 level, then it opens up the possibility of a complete retracement of this sell off, which is closer to the 1.29 level above. But I think that probably gives way to 1.31 over the longer term.
GBP/USD is a pair that is looking for its range for the year, and I do think we're closer to the top than the bottom. But the CPI numbers obviously can have a major influence on what happens over the next several sessions. So do be aware of that. Choppy behavior is probably the norm here, and I do think that the 1.28 level is going to be a fairly significant and important resistance barrier that is worth paying attention to. Anything above there gets interesting, and it could cause quite a bit of volatility. If we see the US dollar drop in general, that may be what happens but at the same time there are a lot of concerns out there that could have money running right back to the United States.
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