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The British pound has been very noisy during the trading session on Thursday as we hang around the somewhat crucial 1.32 level. The 1.32 level has been supported a couple of times in the past, so it'll be interesting to see if it can hang on to any buying pressure. At this point in time, the market is also threatening the 200 Day EMA, an indicator that a lot of people will be watching very closely.
All things being equal, the market is going to continue to be very noisy, but I think you also have a situation where traders are watching the US dollar very closely, as the Federal Reserve seems more hawkish than people had anticipated.
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The technical analysis for this pair is in the state of flux, as we had been bullish for quite some time, but we've recently seen the US dollar really start to take off to the upside, as there are concerns now that the Federal Reserve may not be cutting interest rates anytime soon. In fact, at one point it was roughly a 90% chance of the September interest rate cut, and now this morning we are all the way down to 56%. In other words, the Federal Reserve may have to stay tight for longer than anticipated, and if that does in fact end up being the case, that should strengthen the US dollar across the board.
It's worth noting that the 200 Day EMA is sitting just underneath and should offer support near the 1.3131 level. Anything below there then kicks off a longer-term“downtrend” that technical traders will be paying close attention to. Ultimately, this is a market that I think will continue to play this market to the short side if we do in fact see strengthening US dollar positions against other currencies, but it's also worth noting that the British pound has outperformed most of its contemporaries, so even if this pair were to break down, I would expect it to be a more of a grind to the downside than anything else.
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