The British pound broke down significantly during the week, testing the hammer from the previous week, a very negative sign when it comes to this pair. At this point, I think that it’s likely we will break down, and continue to go much lower.
The British pound has broken down a bit during the week, reaching down towards the bottom of the hammer from the previous week. That’s a very negative sign, and if we can clear that level, extensively the 1.3450 level, the market will break down to the 1.33 handle, and then eventually the 1.30 level where I see a significant amount of support. This trend line break would be a huge deal and would probably continue to push this market lower based upon higher interest rates in America, and of course capital outflows leaving the United Kingdom.
Interest rates have been climbing in America as of late and did of course drive the greenback higher against most currencies. I believe that we are about to see a very strong summer for the greenback, and the British pound probably won’t be spared this bearish pressure. If we do rally from here, it’s not until we break above the 1.3650 level that I would be comfortable buying this market. It’s very unlikely that we will do that, but it would be a very bullish sign and one that would be almost impossible to ignore. On the break down, I think that we could see a lot of volatility and of course momentum to the downside. I believe that the momentum could be rather surprising for a lot of traders, but for the longer-term traders they will continue to add as we show signs of continuing to the downside.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.