GBP/USD Forecast Video for 12.07.23

British Pound vs US Dollar Technical Analysis

The British pound has rallied a bit during the trading session on Tuesday, but then pulled back just a bit during the trading session as a little bit of exhaustion may have entered the market. At this point, it looks like the British pound is going to try to go looking toward the 1.30 level above, which is a large, round, psychologically significant figure.

Underneath, we have the 50-Day EMA, which is sitting right around the 1.2650 level, which is an area where we have bounced from previously. I think that is the bottom of your overall short-term range, and therefore I think that the market remains a bit of a “buy on the dip” type of situation, as we see a lot of upward pressure over the longer-term, but it’s obvious that we cannot go in one direction forever. After all, there will have to be a bit of profit-taking from time to time, which might be part of what we had seen during the day.

If we break above the 1.30 level, then it’s possible that the market then could go much higher, perhaps opening up a move toward the 1.3250 level, as we continue to see traders focus on inflation in the United Kingdom. While we do have inflation in the United States, it seems like traders believe that the Federal Reserve is much closer to cutting back on interest rate hikes, so therefore I think this is more or less a relative trade than anything else. Both currencies could be strong going into the future, but it’s worth noting that the British pound has been a bit of an outperformer for a while, so one would have to assume that translates into better performance in the future.

At this point, a pullback toward the 50-Day EMA could very well happen, but it would not change the overall trend, so therefore I still look at it through the prism of buying on the dips and trying to take advantage of what has been a very substantial trend for quite some time. However, if we were determined to break down below the 50-Day EMA, it could open up quite a bit of questions.

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This article was originally posted on FX Empire

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