GBP/USD Forecast: Sterling Races Higher Against Greenback on Wednesday
- The GBP/USD pair has caught my attention as we have turned around to break the top of the hammer from the previous session.
- While not a perfect camera, the candlestick for Tuesday gave me enough of a “heads up” as to the fact that the British pound might start to take off again.
- On Wednesday, we saw exactly that happen as we broke well above the 1.3150 level.
That being said, keep in mind that the US dollar is in a state of flux, and although it looks very weak, the reality is that there are a lot of concerns out there that could cause major problems, and if that ends up being the case, it’s probably only a matter of time before people run back to the greenback for safety. The British pound on the other hand, is backed by the Bank of England that seems a bit more hawkish than the Federal Reserve, so it makes a certain amount of sense that we continue to rally from here. Furthermore, the British pound has been fairly strong against most currencies, so this is not necessarily that surprising.
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1Buying the dip
At this point in time, it looks like traders are out there buying the dip, and I think that will more likely than not continue to be the case in the near term. The 1.30 level underneath is a large, round, psychologically significant figure, and an area where people would be paying close attention. If we break down below there, then the 50 Day EMA comes into the picture as potential support as well. Anything below there would be a major “shot across the bow” of the British pound and would probably see the US dollar strengthening against most currencies around the world. This would most certainly be a major “risk off move” that a lot of people would be paying attention to. On the other hand, if we can break above the 1.3285 level, then the market could really start to take off to the upside again.
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