By: Bastian Rubben
The nervousness of the US stock markets investors is getting higher every day, as yesterday we saw one of the most bearish trading days we have seen in the recent weeks. Some analysts explained this by the weak economic data that was published during the week, but the reason for the declines is much simpler - the stocks are overbought and a negative correction will occur eventually.
The bearish session in Wall Street pushed the USD higher against the major currencies, though some were weakening aggressively than others. Among them was the British pound that lost altitude against the USD after creating the double-top pattern at 1.60. The pair influenced by the strengthening of the USD and slid to the break-up level, which became supporting level at 1.585, and if the pair breaks it down, it might fall to 1.565. However, if the pound surprises and resumes strengthening, it will try to rise above 1.60 again.
The pound is weakening against the Euro as well, since the Euro managed to block the strengthening of the USD and managed to remain above the important support at 1.33 so far. The pair EUR/GBP has traded through a channel between 0.83 and 0.84 for 3 months, with unsuccessful breaks-up/downs along the movement. The pair has reached the upper boundary of the channel and if the current pattern remains, it will turn over and slide downwards to 0.83. However, a successful break-up at 0.84 this time, might launch the Euro to the level of 0.85 versus the GBP.
