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Christopher Lewis

The British pound has rallied significantly during the trading session on Tuesday, reaching towards the 1.23 level but has pulled back quite a bit at that point. Because of this, it looks like the selling is likely to continue and therefore I like the idea of fading this rally, despite the fact that it was quite explosive. The fact that it has given back quite a bit of the gains suggest that there is no real follow-through here. Because of this, I think that we simply continue the same type of trend the longer term, offering more of a longer-term “sell and hold” type of trade. Quite frankly, the British pound had no business trying to rally the way it did, but obviously people were quite helpful.

GBP/USD Video 20.05.20

At this point in time, it seems as if there are far too many negative headlines out there just waiting to jump on the market, and that typically favors the US dollar over the longer term. This is because of the world reserve currency status and of course the fact that Britain still has to deal with that whole “Brexit thing.” It seems like they currency markets have forgotten about that recently, but something tells me it is not going to be exceptionally long before it is reminded of this. With that in mind, keep the idea of fading rallies in the back of your head, as it should continue to offer opportunities again and again in what has been a reliable move.

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