Potential signal
I am a seller of the GBP/USD pair close to the 1.35 level, on a large short-term red candle, perhaps on the 15 mins chart, IF the US 10-year yield jumps above the 4.30% level.
I would have a stop at 1.3555 and a target of 1.34 below.
The 1.35 level is an area that could determine the fate of the British pound for some time. The British pound has shown itself to be rather bullish during the trading session on Thursday as traders continue to see a lot of volatility. All things being equal, this is a market that has seen a huge range multiple times get tested in both directions and I think that remains the theme here.
Yes, it’s been a very strong trading session on both Wednesday and Thursday but we still have the specter of the 1.35 level offering a little bit of resistance. The 10-year yield in the United States seems to really be a major driver of where things are going right now with the 4.3 level being a level that I’ve noticed seems to have quite a bit of influence.
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The 1.35 level is an area I’ll be watching very closely, and I think this is going to be an interesting setup because honestly, this is a market that if we show hesitation at 1.35 and interest rates jump a little, I think you have a scenario where traders are probably going to start selling again.
Furthermore, you have to keep in mind that Friday features the ceasefire conversation between the Iranians and the Americans and if that runs into a hiccup over the weekend, people could start panicking again. So, I don’t think this is as done of a deal as people seem to believe.
Ultimately, I believe the markets will continue to see this through the prism of a range until we get the ceasefire resolution and see the British pound break above the 1.3550 level. Until then I’m looking for signs of exhaustion to perhaps fade. We’ll just see it’ll come down to a rejection of 1.35 and the US 10-year yield jumping back above the 4.30& level.
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