The British pound initially tried to gain slightly at the open on Monday but as you can see, we have broken down towards the 1.15 level underneath. This is an area that of course is a very important from a psychological standpoint and has showed support of the last couple of days. The British pound has fallen rather precipitously, and quite frankly needs to see some type of relief rally or at least two “kill time” near this area in order to continue lower. The British pound is facing a lot of negativity on multiple fronts, not the least of which is the threat of closing down the country due to the coronavirus outbreak. However, let’s be honest here: the coronavirus was just the pin that was used to pop the global asset bubble that has been a huge factor of the last 10 years or so.
GBP/USD Video 24.03.20
One of the biggest issues facing the world right now is a severe lack of US dollars and therefore the US dollar will continue to be the strongest currency going forward. Think of it this way: most foreign governments price their bonds in US dollars, and therefore it automatically puts up a bid for the greenback. Ultimately, this is seen more so in some of the emerging markets, but it does have an effect everywhere. Just take a look at the Mexican peso as of late, or some of the even more exotic currencies. This of course has a knock on effect against other currencies like the British pound, albeit a little bit more dampened. I like the idea of fading rallies going forward, and I believe that the 1.20 level and just the simple threat of it is going to continue to put bearish pressure on these bounces. Buying this pair isn’t even a thought at this point.
This article was originally posted on FX Empire
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