The British pound continues to be very noisy against the US dollar as we see the volatility and choppiness continue to cause chaos.
The 10-year yield in the United States did drop a little bit during the trading session, but it seems like we have found the 200-day EMA supported.
All things being equal, the GBP/USD market is basically stuck between the 200-day EMA underneath and the 50-day EMA above. With that being the case, I think it does make sense that we squeeze here a bit and, unfortunately for most traders, it'll come down to what happens on the session on Friday with the bond markets. Bond markets, I think, will continue to reflect how they react to the latest headlines coming out of the Middle East or the global situation in general.
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Risk Appetite and Macroeconomic Crosscurrents
Keep in mind that there are a lot of concerns when it comes to whether or not there will be peace in the Middle East and that obviously has a major influence. I believe at this juncture that we are more likely than not to look at a market condition that will remain very agitated and therefore choppy.
The interest rates in Great Britain actually are higher than they are in the United States, but the differential is somewhat negligible. Because of this, I think this comes down to risk appetite more than anything else. The rates in the United States dropping is a good sign for the pound and, quite frankly, it's a good sign for a lot of different currencies. Whether or not that remains the case, we'll have to wait and see.
Keep in mind though, the United Kingdom has a lot of energy concerns that, quite frankly, the United States doesn't have, so that could come into play longer term. To the upside, I think the buyers are targeting 1.35. To the downside, 1.3350 is support. Look for an impulsive candle that should give you a heads up as to where we're going.
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