The British pound continues to see a bit of buying, but on Wednesday, it has been fairly choppy and continues to test the vital 200-Day EMA indicator as well.
GBP/USD
The British pound has been pretty back and forth during trading here on Wednesday as we test the crucial 200-day EMA. The 200-day EMA is an indicator that a lot of people watch very closely, and it just happens to line up basically in the middle of the larger consolidation area, or at least close enough to it.
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We have been in a consolidation area in this pair between 1.3150 and 1.37 over the last year or so, and as we get closer to the 1.3450 level, we are basically in the middle. The 200-day EMA, of course, offers a little bit of technical resistance.
A breakout could be dollar-related, or maybe not.
That doesn't mean that we break out, and it doesn't mean that the US dollar starts falling apart. It is worth noting that interest rates are basically the same here. With British inflation coming out a little hotter than anticipated earlier, this suggests that we could see a bit of a recovery in the pound.
That does not mean that we break out, and it does not mean that the U.S. dollar starts falling apart. All things being equal, I think you have a situation where we just stay in the same range. We got a little oversold, and sooner or later we will get to a sign where we are overbought, probably closer to the 1.36 level.
Ultimately, this is a market that remains very noisy, very likely to have more of a buy-on-the-dip feel to it as long as the U.S. dollar is drifting a little lower. In the short term, though, a little bit of a pullback makes quite a bit of sense.
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