The GBP/USD pair went back and forth during the day on Wednesday, as we are starting to run out of momentum to the upside. This is not a huge surprise, quite frankly we are getting close enough to the top of the overall consolidation area that it makes sense that the sellers would return. If we break down below the bottom of the range for the session on Wednesday, the market should then have turned back around and start falling towards the bottom of the larger consolidation range which we see currently as the 1.40 region. The 1.45 region above is the resistance, so we broke above there it would be extraordinarily bullish and could turn this into a longer-term “buy-and-hold” type of opportunity.
Keep in mind that both of the central banks have their own issues, with the Federal Reserve of course looking likely to cut back on some of the interest-rate hikes that the market had anticipated over the course of the year. In fact, some traders reckoned that the Federal Reserve was going to raise interest rates 4 times this year, and now it looks like it will at best be 2. That of course means that the US dollar has been overpriced so it has been selling off against other currencies. That being said, the British pound has its own issues as we are starting to get fairly close to the vote on whether or not the United Kingdom will stay in the European Union, and that of course has drastic effects on currency and trade.
That meeting is in June, so more than likely we will see quite a bit of volatility between now and then. It is because of this that we feel we will more than likely try to stay within the consolidation area, which leads to choppy short-term trading at best in this market. Even though that’s the case, if we do break out or down from this 500 PIP range, that would be a significant amount of reason to start a longer-term position in this market. Until then, you’re going to have to scalp back and forth.