GBP/USD Price Forecast – British Pound Continues to Test Top of Minor Consolidation

The British pound has rallied ever so slightly during the trading session on Wednesday to continue the consolidation area around the 1.35 level. This is an area that will continue to be very noisy, as the 200 day EMA is sitting just above, the 1.35 level has a lot of psychology attached to it, and of course the 50 day EMA sits underneath and is curling higher. In other words, we are the midst of a “technical squeeze”, but that typically leads to a bigger move once inertia gets released.

GBP/USD Video 06.01.22

To the downside, if we were to break the 50 day EMA it is very likely that we could revisit the bottom. As far as rallying is concerned, a break above the 200 day EMA would more than likely send this market towards the 1.37 level where we had seen some support and resistance in the past. Because of this, I think it is simply a matter of waiting for the market to decide which direction it is going to break out and simply follow.

Keep in mind that Friday is the nonfarm payroll announcement, and that will certainly have an effect on the United States dollar, which of course is half of this equation. With that being said, the market will sooner or later try to figure out which direction it wants to head but one could definitely make the argument that the recent action has been a bit parabolic, perhaps even based upon short covering. Nonetheless, my job is to simply let the market tell me which direction it is going, and follow right along.

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