- The British pound initially gaps lower, tried to recover and has since gotten absolutely punched in the face as we are now just above the 200 day EMA and the crucial 1.2750 level.
- This is an area that I think we are more likely to look at as a major area of inflection.
- If the pound can’t hold this area, then it’s very likely that you’ll see the US dollar strengthen not only against the pound, but probably most major currencies anyway.
The US dollar will be the safe haven currency of choice before it’s all said and done through this tariff problem. And therefore, I think what you’ve got is a situation where it just depends on how long this goes on. If the tariffs last longer than people think, and I think they already have reached that point, you will see the dollar become in vogue again, because quite frankly, you are going to need it to pay your bills. That being said, we are at a major point of inflection, like I mentioned previously, and therefore you have to be very cautious here. You don’t just start shorting wildly.
On a Bounce
If we bounce, we could turn around and go right back to the 1.29 level, an area that we were at just a few hours ago and see sellers there as well. Whether or not the pound can truly take off to the upside for a longer term move remains to be seen. I think a lot of this will come down to whether or not global growth starts or stops. And right now, there have been various rumors about what the Americans might do, and they’ve all been shot down. So, with that being said, it’ll be interesting to see how this plays out, especially with the Europeans now offering zero tariffs. So, it’ll be interesting to see how that influences the United Kingdom. As things stand, this is probably more about a run to the US dollar than anything else.
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