Potential signal:
- I am a seller of this pair if we break the Tuesday low, with a stop at the 1.3410 level.
- I am aiming for the 1.32 level.
- The GBP/USD continues to see a bit of a headwind at this point and could be in the midst of making a longer-term decision.
GBP/USD
The British pound drifted a little bit lower during the trading session on Tuesday, as we are hanging around the crucial 200-day EMA. The 200-day EMA, of course, is a major indicator that a lot of people use to determine the trend. Therefore, it does make a certain amount of sense that this market is trying to figure out where to go next.
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Ultimately, the 1.34 level above is a resistance barrier where we had sold off quite drastically in the middle of the month of June. Because of this, I think this is a market that will have to make a lot of decisions, and we are getting fairly close, at least in my estimation, to making one of those decisions.
The market is struggling a bit to continue the upward momentum, so what I am looking for is some type of selling pressure to start shorting. If we were to break down below the 1.33 level, then we could see this market start to fall apart.
The market is likely to be a scenario where we are watching the US dollar in general, and if the US dollar starts to pick up from here, then we will probably see the British pound drop. That being said, my real use for this pair is the determination of what could happen with the US dollar. After all, this is a market that has been fairly strong, so if you see the British pound fall, then I think you have to believe that other currencies are certainly going to fall in relation to the greenback if history repeats itself with this.
I like the idea of waiting to see whether or not this signal fires off, and it can determine not only how I trade here, but perhaps how I trade with the New Zealand dollar, Australian dollar, Canadian dollar, Japanese yen, and multiple other currencies.
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