British Pound vs US Dollar Technical Analysis
The British pound has rallied a bit during the trading session on Tuesday as we wait for the Federal Reserve announcement. That being said, the market is likely to continue to see a lot of noisy behavior, and therefore I think we will have to wait to see what the Federal Reserve does, and then of course what happens in England, although it’s probably worth noting that the British are dealing with very hot wage gains, which will continue to fuel inflation. In other words, it’s very likely that the Bank of England will have to remain tight for quite some time, and I think a lot of people are looking at it through the prism of this fact.
Currently, it looks as if we are trying to form a little bit of a double top, or breakout. I suspect that within the next day or 2, we should have a resolution to this question. With that being the case, I think a little bit of patience probably goes a long way. If we were to turn around and break down below the 1.2550 level, then it’s possible that we could go down to the 1.2350 level underneath, to continue the overall consolidation area.
The 50-Day EMA underneath offers plenty of support, and therefore it’s likely that a lot of people will pay close attention to that level. Underneath there, then we have the 200-Day EMA near the 1.2250 level, where the overall trend will be dictated. Ultimately, this is a situation where the market will have to make a lot of decisions if we get anywhere near that indicator.
As things stand right now, I think there will be plenty of buyers willing to take advantage of dips in this market, but whether or not we break out right away remains to be seen. There is the possibility of a “double top” foreman, but I think it’s probably a little early to try to start shorting this market anytime soon. Ultimately, I think the only thing you can count on is a lot of volatility over the next couple of days as we have the Federal Reserve and of course the European Central Bank influencing the dollar with their rate decisions.
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