The British pound rallied quite significantly during the trading session on Friday as we reached towards the psychologically significant 1.25 GBP level. There is a significant amount of resistance and choppiness in the past that this area so it makes sense that we would run out a bit of momentum. Ultimately, this is a market that is reacting to Brexit still, and of course Brexit noise is extreme to say the least.
GBP/USD Video 16.09.19
The US dollar of course will benefit from higher bond yields in the United States but all things being equal there seems to be a lot of hope out there that some type of deal can be struck either keep in the United Kingdom within the European Union, or some type of agreement making the Brexit less impactful. At this point, that seems very unlikely and I think that it’s only a matter time before we get some type of negative news in the marketplace that will throw this market into complete disarray. Ultimately, the British pound has rallied far too much and I believe a lot of this could have been short covering.
If we did break above the 1.26 GBP level, then we start to take on the 200 day EMA which of course defines the entire trend. That would be a significant statement in favor of the British pound, but I find it difficult to imagine that happens without some type of an agreement or at least certainty with the Brexit.
Please let us know what you think in the comments below
This article was originally posted on FX Empire
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