A new episode for GBP starting to roll over againThe British pound has tried to rally during the end of the trading week, but by that time that traders went home for the weekend and to celebrate Christmas, it had formed an inverted hammer. It’s worth noting that the market is now below the 200-Day EMA, and therefore a lot of people will be looking at it as a potential breakdown. This makes it the recent action above the 200-Day EMA considered to be a “throw over.”
It’s quite common to see the market jump over one of these indicators, only to fake everybody out and start falling again. The 20-Day EMA is starting to fall back through the 200-Day EMA, and the market is now approaching the 50-Day EMA, and the 1.20 level. It is below the 1.20 level that it’s likely that this market starts to fall rather significantly. Furthermore, it’s worth noting that the market pulled back from a major downtrend line, forming a massive red candlestick that wiped out several days ahead of it. Typically, these types of candlesticks do not happen in a vacuum, so it looks as if there will be sellers above willing to short the pound.
This makes further sense, considering that Jerome Powell has reiterated the desire of the Federal Reserve to stay tight for much longer than people had started to bank on. In fact, we are already starting to hear some of the major news outlets in the United States and elsewhere talk about how the Federal Reserve may have to start listening much quicker than they believe, if the economic news gets bad enough. (They clearly are not listening to the Federal Reserve, which is a direct result of the Federal Reserve bailing out Wall Street and investment banks for the last 14 years.)
It’s very likely that we are coming to the end of a “bear market rally” in this market and breaking down below the 1.20 level will add even more pressure on the pound. However, if the market breaks above the 1.22 level, then it’s possible that the bridge pound retests the major downtrend line drawn on the chart. But it is more likely than not that the market remains somewhat quiet for the next week as liquidity becomes a major issue between major holidays as most trading desks are manned by junior traders this time of year.
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