- The British Pound opened on Monday slightly lower, maintaining a bearish tone.
- With price action below both major EMAs, I expect further weakness toward 1.30 or even 1.28, as dollar strength and BoE policy concerns weigh on sentiment.
The British Pound has gapped a little bit lower during the open here on Monday as we continue to see an overall negative bias to the market. The 1.31 level is an area that I think a lot of people will be watching for the short term, but if we break down below there, then I think the British Pound drops rather significantly.
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The technical analysis is fairly bearish now that we are significantly below the 200-day EMA, and the 50-day EMA is starting to drop toward the 200-day EMA. With that being said, I think we have a situation where traders are going to be more of a “fade the rally” type of group, and therefore, any type of rally that shows signs of exhaustion, I’m going to start shorting. If we break down below the 1.31 level, then the 1.30 level gets targeted, possibly the 1.28 level.
I Don’t Want to Own the Pound
I have no interest in buying the British Pound—not necessarily because I hate the British Pound—it’s just that the US dollar is starting to strengthen against pretty much everything out there, including the British Pound. The British Pound has been a little softer than some of its contemporaries over the last week or so, and as a result, it’s worth noting that traders out there are starting to think that perhaps the Bank of England is going to have to loosen monetary policy. With that being the case, it does make a certain amount of sense that we would see the pound suffer, especially against the US dollar, after the FOMC press conference suggested that we don’t necessarily count on an interest rate cut in December coming out of Washington.
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