The British pound rebounded after falling in early trading for Tuesday, for the third day in a row. At this point, the markets are trying to turn things around, and the daily close will be crucial.
GBP/USD
The British pound initially fell against the US dollar during early trading on Tuesday but has turned around as the Americans have taken over and as usual are selling their own currency. Ultimately though, this is an area I'd be watching very closely due to the 50-day EMA being right here. And that of course is something that a lot of people pay attention to as it is a widely followed indicator.
We are starting to get back some of the gains as we are approaching the 1.3550 level, so it'll be interesting to see if we can hang on to them because the last couple of trading sessions have been inverted hammers. If we were to form another one, I think that would be a very negative sign indeed, probably sending the British pound looking for the 200-day EMA.
Range Bound or Slightly Negative Bias
If we break higher from here, we could make a run towards the 1.3650 level where I would expect to see a little bit of trouble. But ultimately, I think that this is a pair that is probably either going to be range bound or slightly negative. The Bank of England is likely to start cutting rates and quite frankly, the economic numbers in the UK are looking a little weaker as time goes by, especially the labor market. So that will cause some issues.
At the same time, the Federal Reserve has to deal with an economy that isn't quite ready to roll over in the United States despite the fact that people are pounding the table for lower interest rates. With everything that's going on, not only in those areas but also geopolitics, I think the US dollar is going to make it difficult for the British pound to gain any serious traction. Although, I don't necessarily think it falls apart either. Fading short-term rallies that show signs of exhaustion might be the way for
We'll just have to wait and see.