The British pound initially tried to rally during the week but gave back the gains as we got towards the 1.23 level. By the end of the week, we ended up forming a bit of an inverted hammer and it looks very likely that we could continue to go lower. A breakdown below the bottom of the candlestick would open up the floodgates to the downside. Ultimately, the market is likely to continue to go lower based upon what I am seeing, but if we were to break above the top of the candlestick for the week, we could make a play towards the 1.25 handle. I expect that level to be massive resistance as well, so keep this in mind.
GBP/USD Video 25.05.20
Ultimately, this is a market that I think should continue to drop from here, due to the fact that the United Kingdom has so many issues to worry about from a longer-term standpoint. There is the Brexit, there is the longer-term lockdown, and of course the extraordinarily soft economic situation. Beyond that, we also have to pay attention to the fact that the Bank of England is likely to continue to suggest that negative interest rates are a real possibility. With that being the case, the market is likely to see that we are much more likely to see money go to the United States than anything else. If nothing else, we are probably looking at a scenario where US Treasuries continue to attract inflows.