The British pound continues to see buying pressure on Wednesday, as we are looking to break away from the “fear trade.”
GBP/USD
The British pound continues to see a little bit of a recovery during the trading session on Wednesday as yields in America initially fell. At this point it's also worth noting that the British pound has been a little bit stronger than many of its contemporaries as the Bank of England may have to keep itself relatively tight with monetary policy as inflation in that country continues to be rather strong.
With this being the case, I think you need to understand that this is a pair that maybe you don't short but it is a pair that you could buy if you start to see a lot of US dollar negativity. The US dollar negativity of course would be a function of interest rates dropping, perhaps the idea that war in the Middle East starts to cool off.
Technical Indicators and Future Projections
We are approaching the 200-day EMA so I think that’s an area that could cause quite a bit of trouble. All things being equal, this is a market that at the first signs of exhaustion I’ll probably be looking to buy the US dollar against other currencies, but you could make a move towards the 1.3250 level which is previous support.
If we were to break down below there then the market could drop back down to the lows that we saw a couple of days ago. To the upside if we do rally and the US dollar starts to fall apart in general then you have a situation where we could go as high as 1.35. The market has been very noisy, and I think it will continue to be so as we are moving on the latest tweet so by all means position size accordingly.