GBP/USD Forecast: Drops into the Weekend

Ultimately, the direction of the British pound will depend on risk appetite and the performance of the US dollar. 

• The GBP/USD has been on a rollercoaster ride in recent trading sessions, reacting to market movements and news events.
• On Friday, the currency fell in response to the shooting star from the previous session.
• The market is now attempting to test the 1.22 level, which has previously been a resistance level and has some psychological significance.

If the pound manages to break down below this level, it could move towards testing the 200-Day EMA and the 50-Day EMA. Conversely, if it breaks above the top of the shooting star, it could test the 1.24 level, which has been a difficult area for the currency in the past. The 1.25 level is an even tougher resistance area, with a huge double-top formation that suggests significant resistance ahead.

The 1.20 level is another psychologically significant figure that could offer some support if the pound breaks down below the moving averages. However, if it breaks below this level, it could open up a move down to the 1.1850 level, which is a major support level that has been tested several times in the past. Anything below this level could lead to a significant move lower.

Ultimately, the direction of the British pound will depend on risk appetite and the performance of the US dollar. The currency is likely to continue to be a “run to the US dollar type of market,” with concerns negatively impacting the pound. The overall attitude of the market can often be reflected in the movement of the greenback, so don’t underestimate this.

As with any market, there are no guarantees about what will happen in the future. However, understanding the various levels of support and resistance can be helpful for traders and investors in making informed decisions. The psychological significance of these levels can also be a factor, as traders and investors may be more likely to buy or sell at these levels due to human psychology and behavior.

It’s important to keep an eye on news events and market movements that could impact the pound, as well as the broader economic landscape. As always, it’s essential to manage risk and have a well-defined trading strategy in place. By doing so, traders and investors can navigate the ups and downs of the currency markets and make informed decisions based on the available information.