British Pound Continues to Struggle With 200 Day EMA

The British pound has initially rallied during the trading session on Tuesday but gave back gains as soon as we crossed above the 200 day EMA. This is a market that looks as if it is running out of momentum, as we continue to “squeeze between the two major moving averages.” The 200 day EMA is in black on the chart, while the red 50 day EMA is starting to rally from here and reach towards price action.

GBP/USD Video 12.01.22

It seems to me that a lot of what is going on is the interest rates in America rising will possibly have the greenback going higher. The British pound has been a bit of an outlier in the sense that we have seen a lot of strength coming out of Sterling, but it is also worth noting that we are still in a downtrend technically, and you can even make an argument for a bit of a down trending channel on this chart. If that is the case, we are right out the trendline and then I will be interesting to see whether or not something happens in order to make this pair push higher. At this point, it is looking less and less likely, at least not without some type of sideways action in order to work off some of the excess froth.

If we break down below the 1.35 handle, then I believe that the overall channel will hold, and we will probably go much lower at that point. That being said, it certainly looks as if the market is more or less just hanging around this area, so I expect more of the same. Breaking above the top of the candlestick for the trading session on Tuesday would be a good sign that we are perhaps heading towards the 1.37 handle.

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