The British pound has fallen below the support level that has been holding up this market for some time. It looks like the safety of the US dollar continues to be a major driver.
GBP/USD
The British pound has collapsed through a major support level during the trading session on Monday near the 1.32 level. All things being equal, this is a market that I think continues to see a lot of pressure on the downside as interest rates in America continue to spike.
Beyond that, I think you also have to keep in mind that traders will be watching the latest headlines. That has been the major problem for some time and as rates stay above 4.3% and of course headlines coming out of the Middle East continue to suggest that the war is going to last longer, not shorter, that really strangles the United Kingdom economy as it is going to be a situation where the British will have to worry about where some of their energy comes.
Middle East Conflict and Energy Concerns
In that environment, I think short-term rallies are probably to be faded as there is a lot of noise above and breaking out of this range does open up a significant opportunity to push towards the 1.30 level. This is obviously a major level that a lot of people will be paying close attention to.
All things being equal, this is a market that will be noisy and will react to the latest headlines more than anything else but quite frankly, this is also a market that I think will definitely favor the downside considering everything that has been going on for some time. In general, I am bearish, but I recognize all it would take is one positive headline to have the market turn right back around, at least for the short term.