- I cannot help but notice that the British pound has tested the 1.28 level during the day, which of course is a large, round, psychologically significant figure, and an area that has caused a lot of resistance previously in this asset.
- It’s also worth noting that we broke above there previously, reaching toward the 1.2850 level.
In general, this is a market that I think continues to see a lot of noisy behavior, and the fact that we bounce as hard as we have over the last couple of days, suggest that we are going to run out of momentum sooner rather than later. That being said, if we do pull back from here, we could see a lot of support near the 50-Day EMA, which is closer to the 1.2650 level. All things being equal, if we can break above the 1.29 level, then the British pound could really take off to the upside and we could see the US dollar lose a lot of strength (GBP/USD trading pair).
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Next Week
Next week could be crucial, as we will have to determine whether or not the market can take off, but if we were to fall from here, then I think you probably need a day or 2 worth of rather negative momentum. If we were to break down below the 50-Day EMA, or perhaps the 200-Day EMA, then the British pound could find itself dropping down to the 1.25 level. The 1.25 level of course is a large, round, psychologically significant figure, and it shows quite a bit of work, and of course a lot of people will be paying attention to the options markets.
The Bank of England of course could come into play, but we just had the parliamentary elections during the Thursday session, so it does make a certain amount of sense that the market will continue to see a lot of noise, and therefore I think you have to be cautious with your position sizing. However, we are in the midst of the summer trading, and therefore it makes a lot of sense that we would see lackluster performance in just about everything.
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