- The British pound has bounced quite nicely from the 1.26 level on Monday morning as it looks like we are finally getting a little bit of a reprieve here from the oversold conditions.
- That being said, the US dollar is most certainly overbought at the moment, and I think this move makes sense.
- We are starting to see it across against the dollar, but also other ones such as the Australian dollar against the US dollar, the New Zealand dollar against the US dollar, etc.
The Dollar Got Far Too Overbought
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So, with all that being said, I think what we're seeing here is a little bit of calming down of the dollar bullishness. That does not mean that we are looking at some type of major trend change. I don't expect that to be the case. I think we get a little bit of a move here, perhaps even most of the week, until we start seeing seller pressure again.
Seller pressure will come in right around the 1.28 level, I suspect, or perhaps just above there at the 200 day EMA. We do get PMI numbers from both manufacturing and services from multiple economies around the world on Friday. So, between now and then, you might have a little bit of profit taking in the greenback.
But I would also say that if we were to break down below the 1.26 level, that could open up the floodgates for another 200 pips. All things being equal, I think you've got a couple of days of a relief rally just waiting to get stepped on again. The Federal Reserve, although somewhat dovish, there are questions as to whether or not they can cut in December, and that's part of what we've seen over the last week or so, as the markets are trying to sort out what Jerome Powell and company do next.
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