GBP/USD Forecast – British Pound Continues to See Negative Pressure

GBP/USD Forecast Video for 26.10.23

British Pound vs US Dollar Technical Analysis

The British pound initially tried to rally during trading on Wednesday but gave back gains rather quickly as we continue to see downward pressure. Ultimately, the market looks as if it is trying to form a bit of a bearish flag, and if we can break down below the recent swing low at the 1.2050 level, the likelihood is that the British pound could go down to the 1.20 level. Breaking down below the 1.20 level opens up the possibility of a move down to the 1.1850 level, an area that was a swing low multiple times in the past and it should offer a significant amount of support.

On the other hand, if we turn around and break above the highs of the trading session on the previous session, we could go looking to the 50-Day EMA which is rapidly falling and is hanging around the top of the flag. That obviously is something that will more likely than not continue to see resistance, so I think we have a situation where you are fading short-term rallies at the first signs of exhaustion.

It’s difficult to imagine a scenario where the British pound takes off to the upside. All things being equal, I think this is a market that will continue to be very noisy, and of course negative. The British pound has been pummeled by the US dollar, as the Federal Reserve continues to be very tight with its monetary policy, and therefore made the US dollar stronger than most other currencies. Furthermore, we have a lot of geopolitical concerns out there, and that of course has money running into the United States.

Bond yields continue to be very strong, therefore it makes quite a bit of sense that we would see more of a drive lower in this pair, as traders do everything, they can to take advantage of yield coming out of the US as well. Ultimately, this remains a “fade the rally” environment, as we have seen in multiple other pairs that are denominated in the US dollar. Given enough time, I do think that we break down and reach toward the 1.1850 level.

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