The British pound has rallied slightly during the trading session here on Monday, but you can see that we're just hanging around the 50 day EMA. And it looks a lot like a market that is just simply going sideways after a significant drop over the course of three days. But uh this is still a market that is technically I guess up in an uptrend or maybe sideways. The 1.34 level should offer support as long as that holds. I think we're more likely than not okay to the upside. But if we break down below 1.34, then we'll see an acceleration of the US dollar strengthening against the British pound and probably other currencies to drop down to the 200 day EMA just above the 1.32 level. This is the so-called “line in the sand” for the trend from what I can see at the moment.
If We Do Break Lower
Anything below the 1.32 level could be rather ugly for the pound, and it probably sees the US dollar strengthening against not only the British pound but pretty much anything else and we could see just an absolute implosion to the 1.2750 level if that happens. On the upside if we can break above the 1.3750 level which has been historically important then I think the British pound is free to go looking to the 1.40 level, although it's going to take some type of momentum to make that happen. I think we're in a situation where people are a little concerned about the global economy. And if that's the case, the dollar could catch a bid, so be careful with the position size, and recognize as quickly as possible if there is a major shift in risk appetite and sentiment in this market.
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