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Continues to Consolidate Near a Potential


As long as we cannot break above that level, there is still a chance that we break down, but it’s also worth noting that the 50-Day EMA has just broken above the 200-Day EMA, which is the so-called “golden cross.” 

The GBP/USD has fallen just a bit during the trading session on Tuesday, as we continue to look at the 1.25 level as major resistance. Alternatively, I think this is a situation where we have to determine whether or not the 1.25 level is going to be the ceiling, or if it just simply is noise that we have to work hard to break through.

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When you look at the chart, it takes very little imagination to see how we could be forming a bit of a double top at this point. The 1.25 level obviously is a large, round, psychologically significant figure, and therefore a lot of people will be paying close attention to it. Furthermore, we have seen a lot of noise in this area, so I think it makes sense that a bit of “market memory” comes into the picture. As long as we cannot break above that level, there is still a chance that we break down, but it’s also worth noting that the 50-Day EMA has just broken above the 200-Day EMA, which is the so-called “golden cross.” This is a longer-term “buy-and-hold” indicator, but it is quite often late. Ultimately, I think this is a situation where you are looking at a “buy on the dip” mentality until we break down below those moving averages.

Pound Sterling is Struggling to get Above the 1.2750 Level

  • All that being said, the Federal Reserve meeting on Wednesday will more likely than not be the biggest catalyst as the where we go next, but we will have to see whether or not Jerome Powell gets people nervous enough to go flying back into the US dollar.
  • Furthermore, we have to keep in mind that the Bank of England has already said that the United Kingdom was heading into a recession.
  • At the same time, they have inflation, so stagflation could cause a lot of problems.

 In other words, think the British pound at the very least will lag other currencies against the US dollar, but if we see the US dollar really start to strengthen, the British pound will probably be like a punching bag for Forex traders. Even if we do break out, I think the British pound will struggle to get above the 1.2750 level anytime soon. After all, it has lagged behind other currencies such as the Australian dollar and the Euro for a while, and I think it continues to do so.

GBP/USD

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