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Expect a lot of choppy and nonsensical movement over the next several days.
- The GBP/USD currency pair broke down quite a bit Monday as we continue to see the US dollar strengthen against almost everything.
- The 50-day EMA is slicing right through the middle of the overall consolidation.
- It is probably only a matter of time before the British pound has to respect this one way or the other.
The 1.20 level underneath is an important area, and I think testing that is more likely than not going to cause a bit of noise, so I think we will have to see how that plays out. If we break down below the 1.20 level, then it’s likely that we will see this market break down to the 1.18 level. Breaking below the 1.18 level opens up the possibility of a much bigger move to the downside. In that scenario, I would anticipate seeing the US dollar strengthen against almost everything, not just the British pound.
Downtrend to Continue
Pay attention that the interest rate situation in the United States because rates continue to rise, which could send this market much lower. In fact, the market has been in a downtrend for quite some time, and I just don’t see that changing anytime soon. After all, we have seen a lot of strength in the greenback due to a worry about the global economy slowing down, which tends to bode well for the US dollar in general.
On the other hand, if we were to break above the 1.2250 level, then we could have the British pound looking to reach the 1.24 level. I think there is a significant amount of resistance all the way to the 1.26 level, and therefore it’s not until we break above there that I think the overall trend will change completely, and I think a lot of people would start to “FOMO” into this market. I don’t see that happening anytime soon, and therefore you need to be cautious about jumping “all in”, especially if you’re going to go to the upside as there is so much to work through to even make that happen. Ultimately, fading the rallies has worked and I think that will continue to be the case going forward. Expect a lot of choppy and nonsensical movement over the next several days.
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