The British pound has fallen on Wednesday, as we continue to see pressures on this currency.
GBPUSD
The British pound has fallen again during the trading session on Wednesday against the US dollar as we are now testing the 50-day EMA and the 1.35 level. With that being said, I think we have a bit of a binary setup here. If we break down below the 1.35 level on a daily close, it is very likely that we will see this market drop down to the 200-day EMA, which is currently at the 1.33617 level. If we break down below there, that could change the entire trend.
On the other hand, if the market were to turn around and rally and break above the 1.36 level at a daily close, then I think it is a buying opportunity as you would aim towards the 1.3750 level.
Dismal Sentiment and Labor Data
Keep in mind that the United States dollar had been shorted the most it has been in 14 years and generally speaking, that is when markets turn around. With an oversold condition like that, it makes quite a bit of sense that value hunters will come back into the picture, and we also have to pay close attention to the idea that maybe the US economy isn’t coming undone. The labor market is stronger than once thought and now we have the core PCE numbers coming out on Friday and I think the market will be watching that very closely.
In the United Kingdom, we have recently seen employment numbers dwindle a bit, or I should say unemployment claims rising, and that is a bit of concern. The UK unemployment rate rose to 5.2%, the highest since early 2021. Perhaps it makes the Bank of England a little bit more dovish than anticipated as well. So, I do think you have a very nice binary setup here, which may not even kick off until Friday. We don’t know, but I think this is one of your more interesting pairs here and I’ll be watching it very closely.
Potential signal: On a daily close above the 1.36 level, I am buying with a 75 pip stop loss, and a target of 1.3740 above. On a break below the 1.35 level on a daily close, then I am going short, with a stop loss at 1.3575 and a target of 1.3350 below.
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
