British pound continues to find sellers

Kate Leaman
Kate Leaman

12 August 2019

British Pound forex trading

The British pound has been very volatile during the trading session on Monday to kick off the week, initially falling, reaching towards the 1.20 level before turning around and rally again. We have pulled back from the 1.21 area, which is the previous support level from the consolidation area that we had seen. When you look at the chart, you can see quite easily that most of last week we spent going back and forth between the 1.21 handle on the bottom, and the 1.22 handle on the top.

Test of major support

gbp/usd chart

gbp/usd

The British pound has been pretty volatile during the trading session on Monday, initially reaching down towards the 1.20 level where we had seen a major amount of support. After all, this is an area that is large, round, and psychologically supportive, and of course an area that has been important in the past. The bounce from there of course was rather significant, but as the Americans are taking over we are starting to see this market roll over a bit. This shows just how weak the British pound is, as we head toward the Brexit.

British pound is toxic

The British pound is toxic at this point, as we have no idea how the Brexit is going to unfold, but one thing is for sure it seems as if there is a serious lack of clarity here, and as long as that’s going to be the case it’s very likely that the British pound will continue to suffer. Beyond that, in this market is paired against the US dollar which of course is highly sought after as the US treasury market is going to continue to attract a lot of monetary flow. There are a lot of concerns around the world with global growth, and therefore the treasury markets have got a bit of a bid. Beyond that, several central banks around the world are easing monetary policy and there is a shortage of US dollars for funding purposes.

The play going forward

Obviously, the trade going forward in this market is going to be feeding the British pound every time it rallies. During the trading session on Monday we have had several opportunities to do so, and it now looks as if we are going to make another attempt on the 1.20 level. I do believe that level gets broken and that we start to go lower, reaching towards the 1.18 level followed by the 1.15 handle after that. I have no desire to own the British pound, at least not until we get the final flush lower as people realize there’s going to be no deal. When there’s blood in the streets, it’ll be a great time to buy the British pound but we are at that point quite yet. Look for long wicks to the upside in short those on short-term charts over and over as the British pound simply can’t find its own footing and doesn’t look like we are going to see that near term.

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