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Christopher Lewis
GBP/USD daily chart, January 11, 2019

The British pound has rallied over the last couple of weeks against the US dollar, but that’s not to say that there is a lot of British pound strength out there. Quite frankly, this is a market that is trying to figure out where wants to go next, based upon the Brexit, which of course is still up in the air. Beyond that, the US dollar is suddenly soft as Jerome Powell has taken a more dovish stance. With that in mind, it’s likely that we will continue to see a lot of back-and-forth, because all it will take is a few hawkish words from another Fed member to have the US dollar strengthen, albeit temporarily. At this point, I think you still have significant downside risk, so I don’t necessarily like buying this pair.

GBP/USD Video 11.01.19

That being said, if we break above the 1.28 handle, I recognize fully that we could go as high as the 200 day exponential moving average, but I think that is going to take something rather ugly happening to the US dollar. If it happens, I suspect that you are probably going to do better in the EUR/USD pair anyway, because traders have not been punishing the Euro for the Brexit situation. You probably have a little bit more of a bullish case over there quite frankly. Ultimately, this is a market that I think needs to break back down below the 1.27 level before you can trust the short position though. In the next few days, expect a lot of range bound chop.

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