The British pound rallied a bit during the day on Friday, but I believe that the bearish pressure should continue as the Bank of England raising interest rate was a one-time thing from we can see. Ultimately, the market should continue to see selling as if we rally I think that the sellers will come back at the first signs of exhaustion. After all, I believe that the market got ahead of itself thinking that the Bank of England was going to make several interest rate hikes. On the other side of the coin, the Federal Reserve looks very likely to raise interest rates several times in the relatively near future. Because of this, I think that we eventually go lower. A breakdown below the 1.30 level signifies that we are going to accelerate to the downside, perhaps reaching down to the 1.2750 level, and then possibly even the 1.35 handle.
If we were to break above the 1.3250 level, then I think we could go long, but in the meantime, I don’t see the reason to start buying the British pound as the weekly candle is a shooting star at the bottom of a move lower, which is currently sitting on a significant trend line. Because of that, it looks like we could break down and start struggling again. I believe that this past week has been a bit of a sea change when it comes to sentiment with the British pound, and I think that the next couple of days could define where we go for the next 500 pips. Because of this, be very careful by your position sizing, and only add when the trade goes in your favor. However, the uptrend line just below is going to be fermentable, and therefore not a nondramatic breakdown.
Written by FX Empire