The British pound initially broke down below the 1.25 handle only to turn around and form a bit of a hammer. While this is a bullish sign, I don’t necessarily believe that we are at the “bottom” of the market. At this point in time I think the market could rally, but I think it would struggle to get above the 1.2750 level above. That area will be massive resistance, so this could be the simple bounce in the market from being oversold. That being said, I don’t have any interest in buying this market, because if it does rally it’s probably going to be an aspect of the US dollar getting hammered. You can do that through a multitude of currencies that don’t have to worry about something like the Brexit. In other words, it’s a “cleaner trade” than trying to trade the GBP. For example, the AUD/USD pair might be an easier way to play dollar weakness.
GBP/USD Video 22.07.19
On the other hand, if we were to break down below the bottom of the hammer from the week, that could be a very negative sign and send this market looking towards the 1.2250 level, and then eventually the 1.20 level after that. All things being equal though, if we were to close on the daily chart above the 1.2750 level, then I would be a bit more convinced. Again though, I think there are easier ways to short the dollar than to go into the reddish-brown.
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This article was originally posted on FX Empire
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