- The GBP/USD has initially tried to rally during the trading session on Wednesday but gave back gains yet again as we continue to see the 1.20 level above offering psychological resistance.
- Furthermore, we have the 200-Day EMA sitting just above there that is offering a significant amount of psychological resistance as well.
- In other words, I think the area just above is going to continue to be difficult to get above. If we do get above all of it, obviously that would be a major breakout, but at this point it’s likely that need some type of catalyst to get moving.
On the other hand, we were to break down from here, it’s likely that the market could drop all the way down to the 1.15 level, where the 50-Day EMA is at. Ultimately, I think the market has gotten too far ahead of itself, so a pullback makes quite a bit of sense, even if you do believe that the trend has changed, at the very least, it does make a certain amount of sense that the market would have to churn. Quite frankly, if we were to shoot straight up in the air, we would need to see some type of catalyst to make that happen.
Greenback to Become More Attractive
The United Kingdom has reported hotter than anticipated inflation, just as the United States as announced much hotter than anticipated retail sales. In other words, the inflationary fight for the Federal Reserve is far from being over. Because of this, I think this nice rally is starting to run out of steam at a very interesting area, perhaps opening the possibility of the market falling from here and continuing the overall downtrend.
Clearly, the fundamentals have not changed in these markets, even though people continue to think that perhaps the Federal Reserve might be slowing down. Even if they do, monetary policy is going to remain very tight in America, and of course global growth is about to continue slowing down, so therefore it does tend to make the US dollar but more attractive. At this point, I think that the correction is starting to run out of steam, but if we do break above the 1.21 level, then there’s no point in fighting the uptrend at that point, even though it would make no fundamental reasoning.
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