The British pound gapped lower during the trading session on Monday, reaching down towards the 1.2450 level before bouncing again and then selling off. This is a very noisy market though, and of course the 1.25 level will attract a lot of attention from a longer-term traders. If we can make a fresh, new low, this market will collapse rather rapidly in my estimation due to the fact that the hammer on the weekly timeframe will be violated, which of course is a very negative sign. It would show a capitulation by the buyers, and a resumption of the massive downtrend that we have been in.
GBP/USD Video 23.07.19
To the upside, not only does the 1.25 level offer resistance but the 1.26 level does as well, followed by the 1.2750 level. We also have the 50 day EMA tilting lower and reaching towards the present trading area, so I think it’s only a matter time before there’s one reason or another to start shorting. Ultimately, this is a market that is essentially a “one-way trade”, considering that the British pound has the misfortune of dealing with the Brexit right now, and therefore it can’t be bought. Quite frankly, if you’re going to start going against the US dollar, you might as well do it with a stronger currency. However, if the US dollar picks up strength, it makes sense to short a very weak currency against it, and one that has a lot of issues such as this one. Ultimately, this is all about US dollar strength or weakness.
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This article was originally posted on FX Empire
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