Each short-term rally will be a nice shorting opportunity as it allows you to pick up “cheap US dollars.”
The GBP/USD currency pair has gone back and forth during the trading session on Thursday as we continue to see the 1.20 level offer quite a bit of resistance. By doing so, the market looks as if it is more likely than not going to struggle with the 1.20 level again, as we have seen three separate attempts to break above there, and all three of them have failed.
However, you have to pay attention to the fact that the British pound did recover a bit during the trading session, so it looks like it’s got at least a little bit of fight left in it. If we can clear the 1.2050 level, then I believe that the British pound is going to be a bullish currency, at least for the short term. If we break above there, then the market is likely to look to the 50 Day EMA, which is sitting right around the 1.23 level. At that point, I would expect to see even more significant selling pressure.
Alternatively, if we break down below the bottom of the candlestick for the trading session on Thursday, then it’s likely that we go down to the 1.18 level. The 1.18 level underneath is a situation of support that has caused the most significant bounds, and at this point in time, it’s likely that if we were to break down below there, then the market goes even lower. At that point, I would anticipate an exchange rate of $1.16, perhaps even $1.15 over the next several weeks.
The Federal Reserve has an interest rate decision on the 27th, and there will be a lot of people out there waiting to see what happens next. Because of this, the market is likely to continue to be negative in general, therefore I think each short-term rally will be a nice shorting opportunity as it allows you to pick up “cheap US dollars.” In general, this is a market that I think continues to see a lot of noisy behavior, but obviously, the downtrend is very well ensconced in this market, so I don’t think that changes anytime soon. In general, this is a market that I think continues to be noisy at best, so keep that in mind and position size accordingly as the volatility is probably going to get worse.