- During the trading session on Tuesday, we have seen the British pound break well above the 1.2750 level, which is a very bullish sign.
- Because of this, I think that we will continue to see British pound strength, which was present for several weeks, although it’s been a very noisy scenario.
- We have seen the British pound absolutely dismantle many other currencies, but I’ve been a bit hesitant to get long against the greenback. It is now obvious that we are going to continue to see momentum here.
Technical Analysis
The technical analysis for this GBP/USD pair is very bullish now that we are well above the 200 Day EMA, and therefore I think you need to watch that indicator very closely. As long as we can stay above there, then technically we are in an uptrend. After all, most people are aware that longer-term traders often will use the 200 Day EMA as a trend defining indicator.
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To the upside, the 1.30 level above is a potential target, and if we continue to see the US dollar shrank, I think that will very likely be where we end up. Ultimately, if we turn around a break down below the 200 Day EMA, then you could see a situation where the market is little bit confused, and you probably continue to buy British pounds against other currencies such as the Canadian dollar or possibly even the Swiss franc.
In general, this is a market that can be very volatile, so you need to be very cautious with your position sizing, but I think at this point the direction is fairly obvious. As long as inflation numbers in the United States continue to shrink bed, that will have traders out there getting excited on the prospect of the Federal Reserve possibly cutting interest rates. In fact, the market is now pricing in 3 different rate cuts this year, although I think they will be disappointed by that.
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