Pound Looks Soft As It Tests Support

I’m looking for signs of exhaustion that I can start shorting again.

• The GBP/USD currency pair has fallen a bit during the trading session on Friday, breaking down below the 1.20 level.
• However, we have seen the market fit in that area, so it’ll be interesting to see whether or not we can pick up a little bit of momentum.
• At this point, the market looks as if it has formed a major double top near the 1.24 level, and I do think it is probably only a matter time before we break down further.

The 1.15 Level Is the Traget

Breaking down below the bottom of the candlestick on Friday opens up the possibility of an opportunity to send this market down to the 1.1850 level. That was a swing low, and breaking down below there then opens up a trap door for more selling pressure. In that scenario, I anticipate that the British pound drops down to the 1.15 level. In fact, that’s exactly what I expect happens given enough time.

Because of this, the real question is whether or not we get it now, or if we need to rally a bit first to make that happen. If we do rally from here, then it’s likely that signs of exhaustion will be jumped on yet again, as we continue to see a lot of concern around the world when it comes to economics and whether or not the economies around the world are going to continue to strengthen. Central banks around the world continue to be very tight, and more importantly, the Federal Reserve itself has reiterated its desire to get tight. With that being the case, the market continues to favor the US dollar as a result.

If we turn around a break above the tunnel of the hammer, then it’s possible that we could go looking to the 200-Day EMA above, which is dead flat, right along with the 50-Day EMA. Breaking above that level opens up the possibility of a move to the 1.23 level. Above there, then we have that double top that we had talked about. I just don’t see that happening, so I’m looking for signs of exhaustion that I can start shorting again. On the other hand, we just break down below the bottom of the channel, that’s good enough as well, and I will get short of the British pound. Ultimately, this is a market that is going to continue to be noisy.

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