Prior to turning around and displaying signs of strength once more, the British pound opened Monday’s trading session with a reduced gap. After that, the market began to decline in an effort to break through the 1.21 level, which is where we are now as I write this piece. The British pound is likely to decline to the 1.1850 level below, which is a big support level, if we do break down below the 1.21 level. I believe this will be struck eventually, although it might take some time.
Since the UK economy is teetering on some sort of stagflation situation and may be particularly vulnerable to troubles arising from the European Union, short-term rallies continue to be selling opportunities for the British pound. The US dollar also draws some capital since it has established itself as a safe-haven currency, particularly while interest rates in that nation keep rising. The US dollar becomes more appealing as long as interest rates in the country keep rising,
and you need to know how to handle money properly in different situations. The United States certainly seems to be the culprit at this point, and given that we have already broken through significant resistance, it is likely that we will continue to sink much farther.
It’s also important to note that the 50-Day EMA is about to cross below the 200-Day EMA, beginning the “death cross” that many traders closely monitor. Given that this is a fairly bearish long-term indication, many longer-term traders are probably short this market.
It’s unclear whether we will be able to break below the 1.1850 level below, but that’s a discussion for another day because we are still some 300 pip away from that potential goal and support region.
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