The British pound fell a bit during the course of the trading session on Friday as we continue to see a lot of noisy behavior in the markets. As the world continues to look at the idea of the Federal Reserve tightening in the next few years, they have been seeing the need to buy US dollars. I think that is a bit of a stretch, but for what it is worth we just pulled back from a major resistance barrier on the longer-term charts.
GBP/USD Video 21.06.21
Because of this, we will have to pay close attention to the 1.3750 level underneath, as the market has seen quite a bit of support in that area, so it will be interesting to see whether or not it holds. If it does not, then we could take out the 200 day EMA which of course opens up the possibility of a major breakdown. It is going to be a very interesting summer, but at this point in time unless you have already shorted the British pound you probably are best off waiting to see whether or not this level holds. Quite frankly, shorting here could work but you also have to worry about whether or not you are “chasing the trade” as the meltdown has been quite epic and quite quick.
If we do break down below the 200 day EMA though, I think that the British pound has much further to go to the downside and things could get rather ugly in very short order. That being said, there are other signs of stabilization in other currencies, so this causes a bit of a dislocation in general.
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This article was originally posted on FX Empire