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British Pound Confirms False Breakout

The PMI figures coming out of the European Union have probably done very little for risk appetite, and certainly not for the British pound as the British economy is so tightly interwoven with the EU, despite the fact that Brexit happened. There is a general malaise when it comes the markets at the moment, as it seems like the Federal Reserve tightening monetary policy has put the fear of God in almost everybody. That being said, I do think that what is interesting about this is that we have seen the 1.35 level broken to the downside, clearly confirming that the trend line break was a false breakout.

GBP/USD Video 25.01.22

At this point, is probably only a matter of time before the US dollar continues to strengthen quite drastically, and we could be looking at a move back down towards the 1.32 handle if things do not change. That is not to say that it has to happen overnight, but as volatility picks up, people want to own things like US treasuries, which of course take US dollars. While the British pound may be a bit more resilient against selling than other currencies, the reality is that anything that is not denoted as “USD” is probably going to suffer.

With this, I am a seller at this point, either on further weakness or any short-term bounce that shows signs of hesitation. I will probably become quite aggressive at this point in time, with absolutely no interest in trying to bet against the US dollar. Rising interest rates in America make it much more attractive, and of course fear does the same so it is a bit of a “double whammy” at this point.

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This article was originally posted on FX Empire

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