GBP/USD Price Forecast – British pound breaks down to kick off year

The British pound broke down significantly during the trading session on Wednesday, breaking through the 1.27 level. That’s an area that has been important more than once, and therefore breaking through it of course signifies that we are going much lower. Rallies at this point are to be sold, and I believe that the US dollar will be used as protection from the Brexit headlines and troubles.

GBP/USD Video 03.01.19

Rallies at this point should be selling opportunities, and the 50 day EMA at the top of the candle for the trading session on Monday also suggests there is a lot of resistance above. Based upon the reactionary move from that level, I suspect that we are probably going to reach down towards the 1.22 handle underneath, which is the target based upon the descending triangle we recently broke out. It looks to me as if the market participants are trying to get down there now that many of them have come back from the holidays, so I am a seller of rallies going forward. I do recognize the 1.22 level as being structurally important based upon longer-term charts, so I don’t expect to slice through there very easily. The next couple of months will be crucial for the Brexit negotiation process, so expect even more volatility as we get closer to March. I have no interest in buying this pair until there’s a resolution.