The GBP/USD pair initially tried to rally during the trading session on Thursday, but then found enough resistance to retest the 1.2850 level for support again. We have bounce from there, but found sellers above yet again. I think that the market is probably going to continue to consolidate, as we digest some of the recent gains for the US dollar. A breakdown on a daily close below the 1.2850 level should send this market looking towards the 1.27 level next, just as a break above the 1.29 level should send this market looking for the 1.30 level. However, I’m not comfortable buying this pair until we break above the 1.3050 level, as that would show a significant turnaround in overall momentum. Ultimately, I believe that the volatility should continue to be an issue, but right now I think that there is still more bearish pressure than bullish.
The Federal Reserve looks to be a bit dovish, especially when measured against recent statements. Because of this, I think that although the British pound has its own major issues, the market won’t necessarily free fall from here. If we do break down, I look at it as a market that will probably be rather negative but in more of a steady manner than momentum traders would prefer. I believe that a break above the 1.3050 level although bullish, will be more of a grind higher as well as the market also will be suffering from the lack of liquidity during summer trading. Currently, there are far too many questions when it comes to the economy of the United Kingdom for traders to feel confident about the British pound. Alternately, there are still a lot of questions about the Federal Reserve, so I think we may see a bit of indecision.
Written by FX Empire