Headwinds Amid Rising US Interest Rates

I am a seller of the GBP against most currencies at the moment.

• The British pound has experienced a notable decline during recent trading sessions, raising concerns among traders.
• Despite attempts to rally, the pound’s struggle persists, casting a shadow over its prospects.
• Key factors contributing to this situation include the upward trajectory of interest rates in the United States, which bolsters the value of the US dollar.

Should the GBP/USD exchange rate breach the lows observed on both Thursday and Friday, it would open the door to the possibility of a more significant downturn. The backdrop of increasing US interest rates exerts pressure on the British currency. On the flip side, if a rally materializes, the 1.2350 level takes on added significance, drawing upon previous support levels and “market memory.”

Presently, the market sentiment leans heavily negative, dissuading traders from considering long positions. To reverse this sentiment, a breach above the 200-Day Exponential Moving Average (EMA) is required, signaling a shift toward a more favorable outlook. In practical terms, this would entail surpassing the 1.25 level before considering pound purchases. However, it appears that every rally faces exhaustion, providing opportunities for short positions. In this environment, the likelihood of the pound descending to the 1.20 level looms larger than any alternative scenario.

The market’s volatility is further exacerbated by the Bank of England’s decision to maintain the status quo rather than raising rates, as previously anticipated. Additionally, several members of the Monetary Policy Committee (MPC) chose to maintain their positions, suggesting the British rate-hiking cycle may have concluded.

In conclusion, the British pound confronts formidable headwinds amidst the backdrop of rising US interest rates. Attempts at recovery face headwinds, with significant levels such as the 1.2350 mark taking on importance. Long positions would necessitate breaking above the 200-Day EMA and the 1.25 level. As things stand, the market remains characterized by negativity, with potential for a descent to the 1.20 level. Amidst this uncertainty, traders are urged to look for signs of exhaustion following short-term rebounds to capitalize on opportunities. The US dollar, meanwhile, appears poised to gain strength, as the US Dollar Index approaches the crucial 106 level.

I am a seller of the GBP against most currencies at the moment, on a move toward the 1.2350 level, I am selling, and putting a stop loss just above that region. I will be aiming for 1.2011 underneath.

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