The British pound continues to dance around the crucial 200 Day EMA, as traders are trying to determine if the rise of the dollar continues in general.
GBP/USD
The British pound continues to see a lot of volatility on Wednesday as the market continues to look at the 1.3250 level as a support level. With that being the case, I think you have to be somewhat cautious but recognize the fact that this is a market that given enough time will have to make a bigger decision.
We are currently hovering around the 200-day EMA, which of course is an indicator that a lot of people pay close attention to, so therefore I would anticipate quite a bit of noise in this general vicinity. This is exactly what we’ve seen over the last 3 days, and it does suggest that perhaps the British pound is trying to bottom, but it also sets up a fairly obvious shorting opportunity if we were to break down below the 1.3250 level and area that I think opens up the door down to the 1.30 level.
Central Bank Resilience and Risk Sentiment
Keep in mind that the Bank of England is still likely to be somewhat dovish given enough time, but it has been stubbornly hesitant to start cutting rates and therefore it does make it slightly more resilient than many other central banks around the world.
With that being said, I think this is a market that probably remains somewhat choppy but over the long term will more likely than not favor whatever risk appetite does. If risk appetite starts to fall around the world, then you’ll see the US dollar strengthening, if risk appetite starts to rise, then you could see the British pound strengthen a bit.
We’ll just have to wait and see how that plays out. Furthermore, you’re also going to have to pay close attention to the Federal Reserve, everybody’s watching to see if and when they cut rates.