- The British Pound has skyrocketed during the trading session on Friday gaining over a percent as we are racing towards the 1.25 level.
- This is an area I will be watching very closely.
- Most of this move is probably a culmination of PMI numbers in the United Kingdom coming out hotter than anticipated.
The President of the United States doing what he can to pump up the stock markets by screaming for lower interest rates. While the PMI numbers do justify this move somewhat, President Trump does not have the authority to cut rates and Jerome Powell, at least Jerome Powell, thinks he can't be fired so I suspect we have a little bit of a showdown ahead.
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At This Point, We Need to See Followthrough
Regardless, the move makes a certain amount of sense, but now we are in an area that I think is going to offer a real barrier, and it's going to be interesting to see if the British pound can continue higher. The 50-day EMA sits just above the 1.25 level, and then we have the 1.26 level above there, which has previously been important, so I think you have a band of resistance, if you will. It's really not until we get above there that I start to look at this pair a bit differently, but it is worth knowing that we did get extraordinarily oversold.
The question now is, will the fundamental situation in Europe and the United Kingdom, because the two economies are so interconnected, despite Brexit, change? And is the US dollar suddenly going to get sold off? I think basically what you have here is a situation where people who had been buying US dollars needed a reason to take profit, and the last couple of days may have been that reason. I'll be looking for signs of exhaustion, and I won't hesitate to short if I get that opportunity.
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