Key support and resistance levels to watch are 1.20 and 1.23, with possible downside targets at 1.1850 and 1.15.
- The GBP/USD currency pair initially rallied during the trading session on Friday, only to reverse direction and quickly give back some of its gains.
- The resistance encountered earlier in the week created a barrier that the market could not surpass, leading to expectations of another period of consolidation.
- That being said, it’s also worth noting that as soon as New York open, Americans tried to turn things around and therefore it looks like it’s more of that “hopium trade” that you typically see in New York trading.
It is worth noting that both the 50-Day EMA indicator and the 200-Day EMA indicator are relatively flat in this area, further supporting the likelihood of market consolidation. As a result, market participants can expect continued choppy volatility as they try to determine the next course of action.
Questions surrounding the Federal Reserve have created uncertainty in the market. Next week’s meeting, initially expected to result in a 50 basis point rate hike, now seems less likely to deliver such an outcome. While this scenario would typically be bearish for the US dollar, traders are focusing more on the reasons behind the potential lack of an interest rate hike. Concerns over potential issues within the global financial system could negatively impact risk-related assets, including the British pound.
On the downside, the 1.20 level is crucial, as it represents a large, round, psychologically significant figure. A breakdown below this level could send the British pound searching for support around the 1.1850 level, a region that has previously posed challenges. A breach of this level could trigger significant selling pressure, potentially leading to “FOMO trading” as market participants drive the British pound towards the 1.15 level.
Conversely, if the market can break above the highs of this week, the British pound could target the 1.23 level, where more resistance is anticipated. In the current environment, traders should keep a close eye on the Federal Reserve’s actions and monitor any potential risks to the global financial system that could impact the British pound’s trajectory.
The British pound’s rally during Friday’s trading session quickly faded, with the market now poised for further consolidation. The flat 50-Day and 200-Day EMA indicators support this consolidation outlook. As uncertainty surrounds the Federal Reserve’s actions, traders should remain vigilant to potential risks in the global financial system that could affect risk-related assets, including the British pound. Key support and resistance levels to watch are 1.20 and 1.23, with possible downside targets at 1.1850 and 1.15.
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