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Christopher Lewis

The British pound has stabilized quite a bit against the US dollar during the last couple of trading sessions, as we have around the 200 day EMA. I find it is very interesting due to the fact that while the US dollar has been gaining against almost everything out there, the British pound has not fallen against it in the last 48 hours. As we have around the 200 day EMA and stabilize, that does suggest that perhaps a short-term bounce could be coming.

GBP/USD Video 25.09.20

The 1.30 level above should be a bit of a “hard ceiling” for the market, and as we see debates about locking down the British economy due to the coronavirus and of course the Brexit noise, anything is possible. Having said that, I believe that rallies towards the 1.30 level or even the 50 day EMA underneath there will probably be sold into. In other words, even if we do rally from here, I will simply be looking to short the pound. We are starting to see a definite “pro-US dollar” move around the world, even though the Federal Reserve is going to stay loose with its monetary policy for the rest of our lifetimes. This is because there is a lot of fear out there, and the closest thing to “risk free cash” is the US Treasury market.

When times get tough, and global growth is certainly in question, the US dollar tends to do fairly well. I think we are in the process of trying to turn things around and obviously the British pound has a whole host of its other issues to think about. However, I am the first person to change direction if we break above 1.30 on a daily close. To the downside, I believe that sooner or later we will probably go looking towards the 1.25 handle.

For a look at all of today’s economic events, check out our economic calendar.

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