- The British Pound has fallen significantly to reach the 1.25 level, a large round psychologically significant figure that a lot of people will be paying attention to.
- After all, the 1.25 level has previously shown quite a bit of support multiple times in the past, so therefore I think the market memory really grabs the market's attention.
- Furthermore, we also have options traders that will be paying close attention to this, so I think it does make a certain amount of sense that we could bounce from here.
However, and if we do break down below the 1.25 level, it's possible that the market could go down to the 1.2350 level. The GBP/USD market will see a lot of volatility on the way to that level, so it’s not necessarily going to be a situation where we fall straight to it.
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Bounces are Opportunities in this Pair
More likely than not, we will probably see a little bit of a bounce that we can fade. Somewhere near the 1.2650 level, and then again at the 1.2750 level, I would love to see a long exhaustion candle that I can take advantage of. Interest rates will continue to be a major factor here. Although these two have similar interest rate profiles, the reality is that the bond market in America is kind of doing its own thing right now with higher rates than the Fed is hoping for.
So, with all of that, and the fact that there are a lot of geopolitical concerns out there, especially in Europe, that makes a lot of sense that the US dollar continues to attract a lot of inflows. Ultimately, this is a situation where we see a lot of choppiness, but I do think that you're looking for the opportunity to pick up cheap US dollars going forward, as has been the case for some time now and most currency pairs.
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