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Christopher Lewis

The British pound initially fell during the trading session on Wednesday but found buyers underneath the turn things around and show signs of life again. Ultimately though, there is a lot of resistance above in the form of the 50 day EMA, and of course the 1.25 handle. The area between the 50 day EMA and the 200 day EMA should offer quite a bit of noise, and quite frankly even though the British economy has outperformed what the Bank of England thought it would do, we still have a lot of concerns when it comes to Brexit and many other issues.

GBP/USD Video 02.07.20

The market will find signs of exhaustion able to be sold into, and that quite frankly is how I am going to look at this market, one that I will be trying to buy “cheap dollars.” The market so far is making a “higher low”, so there could be an argument for a resumption of the uptrend but I think that is a little premature at the point to assume that, and as a result I think that there will be a lot of noise.

A breakdown below the lows of the last couple of days, the market is likely to go looking towards the 1.20 level underneath. There is a lot of volatility and noise, and therefore it is worth paying attention to the most recent Brexit headlines, and of course the overall risk appetite. Risk appetite falling will work against the British pound when it comes to the US dollar. I expect nothing but volatility going forward.

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

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