The British pound has initially rallied during the trading session on Tuesday but found a bit of exhaustion at the 1.23 level. Quite frankly, this isn’t much of a surprise though, because we have a lot in the way of Brexit headlines out there that continue to throw the British pound around. The DUP has rejected the reported deal offered by the EU, and therefore it shows that we are still at a complete impasse. Quite frankly, this should not be a surprise at all, and we are in a downtrend anyway so simple technical trading would have told you it was probably likely to sell off.
GBP/USD Video 10.10.19
The bridge pound has rallied towards the 1.23 level, rolled over to form a bit of an inverted hammer, sitting right on top of the 61.8% Fibonacci retracement level. If that level is to be broken to the downside it typically will send the market down to the 100% Fibonacci retracement level which is closer to the 1.20 handle. At this point, that is my main thought process, simply selling the British pound underneath the 1.22 handle. In the meantime, short-term rallies are probably going to continue to be faded, especially closer to the 50 day EMA. Ultimately, the 50 day EMA has been somewhat reliable over the longer-term, and of course it’s only a matter of time before something negative comes out involving the Brexit. Beyond all of that, the US dollar has shown strength as of late still, so that’s yet another reason to think that the market will roll over.
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