- The British Pound weakened through Wednesday, pressured by expectations of upcoming Bank of England rate cuts.
- The analyst sees 1.30 as possible support, but a break below 1.32 could send GBP/USD toward 1.2750 amid persistent U.S. dollar strength.
The British Pound has spent the bulk of its trading on Wednesday to the downside. All things being equal, this is a market that I think continues to see downward pressure, but that doesn't necessarily mean that we are going to fall off a cliff. The market could be looking at the 1.30 level underneath as a potential target.
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Maybe 1.30 is a Floor
It could, in theory, be a floor, but at this point, I think breaking down below the 1.32 level kicks off a move all the way down to the 1.2750 level. The 1.2750 level is an area where we had seen a lot of momentum to the upside back in April, and now it looks like we are going to do a complete round trip. This is about the US dollar more than the British Pound.
Although we had recently seen a little bit of a rally in the Pound due to the fact that the Bank of England chose not to cut rates, the vote was very close, and it does suggest that we are in fact, going to see British rate cuts rather quickly. With this being the case, the market will continue to see a lot of volatility, but I think you have a scenario where each time it rallies, you have to be looking for selling opportunities.
If the market does in fact rally and give up the gains, the market then fires off another selling signal. As far as buying is concerned, I'd have to see the British Pound break above the 200-day EMA at the very minimum to start thinking about buying. Furthermore, I'd have to see the US dollar struggle against multiple other currencies—it wouldn't just be here.
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