GBP/USD Forecast Video for 08-02-2024

British Pound vs US Dollar Technical Analysis

The British pound has had a positive session during the day on Wednesday, as it looks like the market is trying to threaten the 50 day EMA. The 50 day EMA, of course, is an indicator that a lot of algorithms will pay attention to, but perhaps more importantly, in this area we have previous support, so it should now be resistance. “Market memory” could become a thing at this point.

We’ll have to sort out whether or not that recent sell off was the real deal or if it was just a short term blip on the radar. If we get a daily close above the 50 day EMA, then I think we probably go looking to the 1.2750 level again, which is an area that’s been pretty resistive. Breaking above that would be very bullish obviously, but we could not do that for the better part of a month. So I don’t know if it happens anytime soon, we’ll have to wait and see.

But it certainly seems as if Jerome Powell last week did spook a lot of traders as he was talking about perhaps staying tight for longer than anticipated. That being the case, of course, the British pound had to be readjusted in its pricing. Underneath we had the 200 day EMA that has offered significant support right out the crucial 1.25 level, while I think overall we are starting to see currency markets settle into a tightening phase.

In other words, they are going to be consolidating and unfortunately that might be the case this year as now most central banks look likely to cut. With this I mean it might be like it was a couple of years ago when there wasn’t a whole lot of action in currencies other than range bound trading. If that’s the case, you have to adjust accordingly and the British pound certainly is making an argument for that to be the case in this currency pair, so pay attention to those levels.

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This article was originally posted on FX Empire

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