- The British pound slid sharply on Friday as 1.32 capped gains, with weakening technicals and a looming death cross reinforcing a bearish bias.
- Expectations for a potential BOE rate cut further pressure GBP while short-term rallies continue to attract sellers.
The British pound has fallen quite a bit during the trading session against the US dollar on Friday, as the 1.32 level has offered a bit of a barrier. Ultimately, this is a market that I think you have to look at through the prism of being in a downtrend now that we are below 1.32, which means if we can break above the 1.32 level, then that would actually be a very strong sign.
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Potential “Death Cross”
Nonetheless, the 50-day EMA breaking down the way it is and looking to cross below the 200-day EMA suggests that perhaps we might get the so-called death cross. And that, of course, is a very negative turn of events as the death cross will attract a lot of longer-term traders. The US dollar itself has been relatively strong. And I think that probably continues to be the case.
But the British pound is a little bit different situation in the sense that, despite the fact that the Bank of England did not cut rates last time, the reality is that the vote count was very close. So, with this, I think you have a situation where traders are keeping an eye on the idea of lower rates coming out of London. And that will have a major influence on what we see here.
I fade short term rallies that show the first signs of exhaustion. I like the US dollar in general right now, but more importantly, don't necessarily like the British pound. If we were to break above the 1.32 level and then sustain that for a day or two, then you can make an argument for getting long. But until then, I'm more of a downside player at this point.
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