The British pound has broken down rather significantly during the course of the week, slamming into the 1.350 level. There is a little bit of a minor trendline there, and I think at this point in time it is likely that could offer a little bit of support, but at the end of the day I think it is much more supported near the 1.3750 level. If we break down below there, then it is possible that we could see a move down to the 1.35 handle. On the other hand, if we were to turn around and recapture the 1.40 level, then it is possible that we could go looking towards the 1.42 above, which is a major resistance barrier.
GBP/USD Video 21.05.21
I think the British pound had a rough week due to the Federal Reserve more than anything else, so the question is whether or not the market takes the weekend to digest the idea of inflation and comes back to normalcy, or does it continue to freak out about the idea of the Federal Reserve tightening ever so slightly in the next two years? Quite frankly, is very likely that the Federal Reserve ends up turning around again, so I think this is a very dangerous market.
If we start to see stock markets melt down a bit, it is very possible that the Federal Reserve will do something to pick them back up, and therefore sell the US dollar right off. We are not there yet though, so at this point in time it is likely that we continue to see a lot of choppy and erratic behavior, but when you look at the longer-term charts, the trend still has not changed.
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This article was originally posted on FX Empire