British Pound Struggles with Momentum

Position sizing will be crucial.

• The GBP/USD currency pair pulled back a bit Tuesday as we continue to see the British pound rally yet struggle to hold on to the gains.
• The 50-day EMA is hanging about in this area, so a certain amount of technical analysis comes into the picture as well.
• This is a market that has been in a downtrend for a while, and while we are looking for an opportunity to short this market, there just has not been much in the way of clean price action.

Market Likely to Be Noisy

Even if we do rally from here, the 1.24 level should offer a significant amount of resistance, extending all the way to the 1.26 level. We would have to break through all that area in order to go to the upside for a longer-term move. If we do break through all that, then I would be willing to argue for a trend change. Until then, I don’t see that happening, so keep in mind that this is the market that will continue to be noisy at best, and therefore we need to see a bit of confirmation one way or the other.

If we were to break down below the 1.20 level, then I believe that the longer-term downtrend overwhelms us, and we go looking towards the lows again. Until then, I think that we will continue to see a lot of noisy behavior, but I still prefer fading rallies overall. That doesn’t mean it will always work, but it goes with the longer-term trend. Sometimes, that’s about as good as it gets for a trader.

The interest rates in America have dropped a bit as of late, but they turned around during the day on Tuesday, and you can see what the result was. I don’t necessarily think that the rates are going to continue to skyrocket, but at this point, it’s obvious that the market is more likely than not going to be noisy and choppy, and that typically favors the US dollar simply because people run towards bonds, which of course need US dollars to buy. (I am obviously speaking of US bonds at this point.) It’s not necessarily an anti-British pound thing, it’s more like a pro-US dollar thing at this point. Position sizing will be crucial.

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