British Pound Showing Signs of Exhaustion

The British pound has initially tried to rally during the trading session on Friday but gave back gains as we continue to see a lot of hesitation. After all, the Thursday candlestick was a massive shooting star that is centering itself at roughly 1.37. By showing this type of price action, I think it is becoming obvious that the British pound is getting exhausted, and perhaps the idea of the United Kingdom exiting the pandemic quicker than many of the other major economies may have run its course. Furthermore, you have to keep in mind that there are a lot of concerns out there about central banks around the world tightening, and that could have a major effect on what is going on. In a “risk off environment”, the US dollar remains king.

GBP/USD Video 17.01.22

To the downside, I think you could easily see a drop towards the 200 day EMA which is currently at the 1.36 region, and still find a nice uptrend going on. That is not to say that we have to stop there, just that it is an area where I think a lot of people will be paying close attention to. At this point in time, I think there would be plenty of support in that area, but I would also be very cautious about jumping in right away. After all, this thing could pick up a bit of momentum, and if it does that ends up being a very ugly thing indeed.

In general, I would anticipate more negativity and ugliness, as this market has clearly run out of steam. The US dollar is strengthening against most currencies, with the exception of the Japanese yen, which is even stronger, which is yet another reason to think that perhaps we are in a major “risk off” situation.

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