- The British pound has rallied a bit during the trading session on Tuesday, as we have tested the crucial 200 Day EMA.
- This of course is an indicator that a lot of people will be paying close attention to, as it is so important for determining the overall trend.
- Because of this, I think you have a situation where the longer-term bulls are trying to do everything, they can to pick the market back up.
Ultimately, as long as we have more of a “risk off” attitude in the world, it does make a certain amount of sense that the US dollar should continue to strengthen. As long as there are a lot of concerns out there, I think it’s probably only a matter of time before the US dollar continues to strengthen. The bond markets in America are seeing yields rise, and this makes the dollar more interesting for traders than the pound at the moment. If this continues, we will have to see what the trend might do next.
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Technical Analysis
The technical analysis for this GBP/USD market is in a precarious state at the moment, due to the fact that we are testing the 200 Day EMA, and it means that for some traders, we may be in the midst of a trend change it again. On the other hand, if we were to break higher, we could see a situation where traders start to pile into the British pound again, perhaps driving it toward the crucial 1.29 level. Regardless, I think you have a situation where we are going to see a lot of volatility regardless. That being said, if we were to break down below the 1.27 level, then I think it opens up the possibility of a significant drop from here, perhaps down to the 1.25 level.
I expect to see a lot of choppy and back and forth confusion, but I do think that eventually over the course of the next couple of weeks we should get some clarity. As we continue to see tariffs give people headaches, therefore I would assume that volatility will continue to be a major issue regardless of what happens over the next couple of days. However, we are reaching a major inflection point, so clarity could be coming.
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