(MENAFN- Daily Forex)

• The British pound tried to rally on Monday but failed near 1.32, reinforcing resistance and the likelihood of continued downside.
• With potential Bank of England rate cuts ahead, I expect renewed selling pressure toward 1.30 and possibly 1.2750.

The British pound initially tried to rally against the U.S. dollar on Monday but found the 1.32 level to be a little too much to overcome. With that being the case, I think it makes a certain amount of sense that the downtrend should eventually continue. After all, we have a scenario where much of what we have been going through has been a reaction to the Bank of England and its refusal to cut rates last week.

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That being said, the vote count was still pretty close, and therefore, it suggests that we are eventually going to see those rate cuts coming out of London. I think that lines up quite perfectly for a short-term bounce that you can start selling into. The 1.32 level has been important a couple of times in the past as support, so now we have to ask the question: Is market memory coming into the picture to offer resistance? So far, it does look as if that's the case.

EURUSD Chart by TradingView

That being said, I also recognize that even if we break above there, then you have the 1.3263 level where the 200-day EMA currently sits. That, of course, is an area that a lot of people would be watching closely. Above there, technically speaking, you could be looking at a resumption of the previous uptrend. But we did break down through a major consolidation area, and now we're trying to retest that bottom to see if we are in fact going to break down. So far, it looks like we are. The 1.30 level underneath is a large, round, psychologically significant figure that could offer support. But if we crash through there, the 1.2750 level is your next target.

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