- The GBP/USD had initially tried to rally during the session on Wednesday, breaking above the 1.15 level again.
- However, we have turned around to show less than impressive momentum, and now it looks as if the British pound could break below the 50-Day EMA.
- If it does, that opens the possibility of further selling pressure, perhaps down to the 1.1250 level, and that eventually the 1.10 level.
The downtrend line that I have drawn on the chart also has offered a bit of resistance, and of course, there are a lot of questions as to what the Bank of England will do. After all, inflation is a major issue on both sides of the Atlantic, so a lot of this could come down to risk appetite in general. I do not think there is a lot of risk appetite out there, although traders had recently talked themselves into thinking that the Federal Reserve was going to come to bail them out. After the press conference, it’s very clear that the Fed doesn’t necessarily pay attention to their problems, so now the markets are on their own yet again.
Looking to Fade Rallies
If we were to break above the downtrend line, that could open a move to the 1.17 level, and then possibly the 1.20 level. That would be rather impressive, but I think at this point you can also even start to make an argument for a “rising wage”, which is yet another reason to think bearish now. Nonetheless, this is a market that I think given enough time we will have to make a bigger decision, and it is worth noting that every time we have rallied over the last 48 hours, the sellers have come back into the market to crush it.
Keep in mind that the jobs number comes out on Friday, so that’ll obviously have a certain amount of influence on the market as well, so with that in mind, I think you got a situation where you are probably going to continue to see choppiness. However, once we get through the end of the week, we may have a little bit more clarity as to where we are going long-term. I suspect that the longer-term downtrend is still very much intact, and it’s only a matter of time before we see a reconfirmation of that.
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