The British pound went back and forth during the trading session on Friday, as the 1.35 level continues to attract a lot of attention. The fact that we have struggled over the last couple of days should not be a huge surprise considering that we had gotten a bit parabolic, and of course has run out of momentum. That being said, the market now has to focus on reality, as the massive, short covering rally is probably over. The question now is whether or not we will have enough momentum to continue going higher, or are we going to start to roll over again?
GBP/USD Video 03.01.22
The 50 day EMA underneath is of course going to be supportive, so that will be the first target for the sellers if they do break things down. Even though we have rallied the way we have, the reality is that we are still very much in a downtrend longer term so you should keep that in the back of your head. A lot of this will come down to US dollar strength or weakness, and of course risk appetite next month.
The jobs number comes out on Friday and that will have a major influence as to where our first impulsive move heads, so keep that in mind. The first couple days might be a bit choppy but at the end of the week we will have had most traders putting risk back on in order to get their books moving for the year. If we can break above the 1.36 level, then that would prove to me that the British pound was ready to continue rallying.
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