British Pound Continues to Squeeze Sideways

The British pound has rallied a bit early during the trading session on Wednesday as we reached towards the 200 day EMA initially. That being said, the market continues to squeeze between the 200 day EMA and the 50 day EMA, as we simply just do not seem to have any reason to go one direction or the other. After all, the market is looking at two central banks that are both hawkish, so they do not really know how to behave in that scenario. Both currencies should be relatively strong, so one essentially washes out the other.

GBP/USD Video 17.02.22

If we break down below the 1.35 level on a daily close, then I think it brings us a little bit of clarity, perhaps a move down to the most recent low near the 1.3380 handle. On the other hand, if we break above the 1.36 level then we will more than likely take out the downtrend line above, go looking towards the 1.37 level, which breaking above their opens up a much bigger move for a longer-term trend.

This probably would need some type of major “risk on” environment, or cracks in the ice when it comes to the Federal Reserve and their desire to raise interest rates as often and as aggressive as the market seems to think. Because of this, you will have to be very cautious and recognize that in the short term you are probably looking at back-and-forth trading on short-term charts at best. That is fine, just adjust your size accordingly.

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