The 1.20 level will likely continue to be significant resistance, especially now that we have had this candlestick and with the 50-Day EMA sitting just above it, along with the 200-Day EMA.
- The GBP/USD has been quiet during Wednesday’s trading session, hovering around the 1.18 level.
- However, it’s worth noting that a massive “M pattern” has just been broken, confirming that the 1.24 level was a potential massive top from a technical analysis standpoint.
- If the pound breaks down below Wednesday’s candlestick lows and sensibly blows through the 1.18 level, it could drop another 3 handles to the 1.15 level.
The 1.15 level is psychologically significant and has seen a lot of noise in the past, making it a potential area where “market memory” could come into play as traders defend that level. Additionally, there may be large blocks of options with strike prices in that vicinity, further supporting the idea of defense. One would have to think that somebody down there would be interested in keeping the pound above that massive barrier.
The size of Wednesday’s candlestick suggests further momentum to the downside, making it a good idea to fade short-term rallies that show signs of exhaustion and look for a breakdown of the overall lows. The 1.20 level will likely continue to be significant resistance, especially now that we have had this candlestick and with the 50-Day EMA sitting just above it, along with the 200-Day EMA. All of these factors line up for a potentially slow descent.
There’s likely to be follow-through in Wednesday’s move, and it’s only a matter of time before the pound reaches the 1.15 level. If it breaks down below that, the pound could drop further to the 1.1250 level. Buying is not a feasible option at this point, and even if there were a significant move above the 1.22 level, the double top just formed suggests that it may end up being a one-way trade.
The British pound has been quiet during Wednesday’s trading session, but the technical analysis suggests a potentially significant drop. The 1.15 level is a potential area of defense due to its psychological significance and past noise. Short-term rallies should be faded, and a breakdown of Wednesday’s lows should be looked for. The 1.20 level will likely be significant resistance, and if the pound drops below 1.15, it could continue to drop to the 1.1250 level. After that, we could even be looking at the 1.10 level, but I anticipate that it will probably be a very noisy move all the way down.
