(MENAFN- Daily Forex)
- The GBP/USD initially tried to rally during the trading session on Thursday piggybacking to show lackluster results.
- Ultimately, this is a market that I think will continue to break down but it's also worth noting that the 1.1250 level was an area that I had called for previously.
- At this point, we have already tried to rally but gave up those gains, so now I must determine whether that was enough. I don't know now, but I do suspect that the 1.15 level above should continue to be thought of as the“short-term ceiling.”
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The 50-Day EMA sits near the 1.1750 level and is dropping significantly. I think given enough time, we are going to continue to see people look to pick up value when it comes to the greenback, meaning that they will fade rallies each time they happen. The British pound must deal with an economy that may or may not have enough energy, as the British government is coming up with schemes to help protect businesses from higher energy costs. In other words, huge parts of the British economy could go under if they don't get some type of help.Looking to Fade Rallies
The fact that the Bank of England raised interest rates recently was a bit laughable because even though there is significant inflation , the reality is that higher interest rates are going to do damage as well. They are essentially stuck with“stagflation”, until the overall global supply chain gets back in order.
In fact, I think a lot of people are missing the bigger point here. The bigger point here is that globalization is coming unraveled. This means that we are going to have years of pain in fits and starts, and currencies like the British pound are going to be especially susceptible because it's an island. Yes, Americans will certainly help their British cousins, but when it comes to energy there's only so much, they can do. I continue to fade rallies, and I think that the 1.10 level is targeted next, and I'm even starting to have thoughts of parity, which is something that seemingly was impossible just a few short months ago. It's amazing how quickly things have changed due to the energy situation globally.
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