- The British pound saw a mild rally as the US dollar weakened, but broader sentiment remains negative.
- Key resistance at 1.32 could reinforce dollar strength, while technical signals point to potential further downside toward 1.2750.
The British pound rallied slightly during the trading session on Monday as we saw the US dollar lose some strength across the board. Ultimately, I think this is a pair that still sees a lot of negativity out there, and given enough time, we will likely see that end up being a selling opportunity on signs of exhaustion.
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This will be especially true near the 1.32 level, an area that previously had been significant support and now should be resistance. Rallies at this point in time that do show signs of exhaustion will only confirm the US dollar strength that we have seen across the board. And it's worth noting that the Bank of England recently chose not to cut rates but came awfully close when you look at the vote count.
I think it is probably only a matter of time if the English cut rates and therefore the British pound will continue to have a little bit of an overhang. If it were to break above the 1.32 level, then I think the British pound could start to change its overall attitude. I don't even know if that is necessarily the end of the downtrend. I just think it could bring in more volatility. It is worth noting that the 50-day EMA is now threatening to break down below the 200-day EMA, kicking off the so-called death cross. And that, of course, is something that some longer-term traders will pay attention to as a potential negative sign.
If we break down below the 1.30 level, then there is a swing low that I would be watching for a potential target in the form of 1.2750 underneath for a profit target on that move.
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