- The British pound initially pulled back just a touch during the early hours on Tuesday but has seen enough support to turn things around and show signs of strength.
- Furthermore, it’s probably worth noting that the 50 Day EMA sits right there as well at the bottom of the candlestick, and therefore a lot of people will be looking at this as a potential technical bounce. Ultimately, the market could go looking to the 1.36 level above, which is a large, round, psychologically significant figure. It is also an area where we had seen a lot of trouble previously, and therefore if we were to break above it, it would obviously signify something serious.
Technical Analysis
The technical analysis for this market is somewhat flat, but recently we did try to break out above the 1.36 level, only to form a massive shooting star. Because of this, if we can break above the top of the shooting star from Wednesday of last week, I think that is an extraordinarily strong signal for the British pound to go higher, because it was a reaction to the press conference coming out of the Federal Reserve. Remember, it was the Federal Reserve that turned things around as they did not sound as dovish as people had hoped.
It’s worth noting that at the 1.34 level below it has offered significant support, and therefore we need to pay close attention to that level if we do drop toward it. A breakdown below that level would obviously be a very negative turn of events, but I think all things being equal this is a market that will continue to see short-term “buy on the dip” scenarios, but I don’t necessarily think that we are in the clear” for a huge move to the upside. Expect a bit of volatility, but the reality is that the US dollar is in a state of flux as people are trying to sort out whether or not we need safety, or just to run from America.
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