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Christopher Lewis

The British pound initially tried to rally during the trading session on Monday, but then broke down significantly below the 1.23 level. A market move that breaks down below the 1.2250 level should send more momentum to the downside and perhaps reaching towards the 1.20 level underneath. At this point, rallies are to be faded, as the United Kingdom continues to suffer at the hands of economy that continues to stutter and of course will have to deal with the lockdown. Ultimately, this is a reflection on how much struggling there will be in the UK, in comparison to the United States which not only has the benefit of having a safety currency, but also the fact that the market is starting to price in the idea of the United States getting back to work as well.

GBP/USD Video 12.05.20

With all that being said, if we can break down below the candlestick from the Thursday session, that also break through quite a bit of support, and therefore should open up a fresh wave of selling. I do not really have a scenario where I am buying the British pound right now, and it certainly looks as if we are running out of momentum. In fact, you can take a look at this chart and suggest that it is showing signs of distribution, in accordance to the Down Jones Theory. At this point, I continue to fade rallies and look for opportunities to sell on a major breakdown for at least 200 points, perhaps even 400.

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