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Christopher Lewis
GBP/USD daily chart, December 31, 2018

The British pound rallied a bit during the trading session on Friday, reaching towards the 1.27 handle. The 50 day EMA is just above and it is turning lower. I think we are going to continue to see sellers in this area, and it’s difficult to imagine a scenario where the British pound suddenly explodes to the upside between now and New Year’s Day. Beyond that, we have concerns about the Brexit and the Brexit of course is up in the air at the moment. As long as there are continuing concerns and a lot of confusion, it’s very likely that the British pound will continue to struggle overall.

GBP/USD Video 31.12.18

Quite frankly, I think the only reason that the British pound has rallied it all has been that the Federal Reserve has suddenly sounded a bit more dovish than initially thought. However, it’s only going to take a negative Brexit headline to push this pair back down, and drive it towards the 1.22 handle underneath, which is my target based upon the previous descending triangle that we have broken through and now retested the bottom of. I don’t think this happens overnight, but certainly I believe that longer-term you can imagine a scenario where this pair grinds a bit lower, reaching towards that level over the next couple of months as the Brexit seemingly is destined to be a “hard Brexit”, as we can’t get any type of agreement going between the EU and the UK Parliament. Quite frankly, I don’t think that is likely in the short term.

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