GBP/USD Forecast: British Pound Reaches Lower

I do believe that ultimately we will have a situation that allows for bigger moves to the downside than up, so pay close attention, scale into your positions, and ride the waves lower. 

• The GBP/USD currency pair had a rough session on Wednesday as we are well below the 1.20 level.
• It ended up recovering a bit towards the end of the day, but we are so beaten down that it’s difficult to imagine that anybody with any sense at all would be a buyer.
• There could be short covering rallies at times, but those are going to be opportunities to get out.

At the first signs of exhaustion after a shorter rally, I anticipate that a lot of traders will come back into the market, especially near the 1.20 level, followed by the 1.22 level. The 50-day EMA continues to drop, and now it looks as if it is trying to break down below the 1.24 handle, meaning that it will offer dynamic resistance sooner or later. I think given enough time, we probably have a market that is willing to go much lower, with the possibility of 1.18 being targeted.

Breaking Down Below 1.18

If we were to break down below 1.18, then I would be looking at 1.15 before it’s all said and done. That being said, the market is a little oversold at this point so we are probably due for some type of bear market bounce. Nonetheless, if you are patient enough you should get an opportunity to pick up “cheap US dollars” at lower levels and take advantage of what has been a very strong and obvious trend. The market is one that you cannot fight right now, so standing on the sidelines and waiting to see how it all shakes out over the next couple of days is probably the best way forward. The British pound is struggling right along with other European currencies and economies, and as long as the Federal Reserve continues to be the tightest central bank out there, it makes quite a bit of sense that the US dollar will strengthen. I do believe that ultimately we will have a situation that allows for bigger moves to the downside than up, so pay close attention, scale into your positions, and ride the waves lower. If we were to break above the 1.26 level, then we could be talking about a trend change, but that is so far away I’m not even thinking about it right now.