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GBP/USD Forecast: GBP Gives Up Early Gains – 12 May 2022

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We are in a downtrend, and there is no point in fighting it.

The British pound initially tried to rally but found enough resistance at the 1.24 level to turn things around and start selling off again. This is a market that has been in a downtrend for some time, and I just do not see how that would change anytime soon. The market will continue to be very noisy, but as the interest rate differential between the two economies continues to favor America, I think that will be one of the main things that people are paying attention to.

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Beyond that, the Bank of England has already stated they expect the economy to go into a bit of a recession, so that makes sense that traders would be shying away from the currency. If we do break down below the lows earlier this week, it opens up the door for a move down to the 1.20 handle. The 1.20 handle will have a certain amount of psychology attached to it, so I would expect to see some type of defensive in that area.

On the upside, if we were to take out the 1.24 level, then it is likely that the British pound will start to threaten the 1.25 level. The 1.25 level will attract a certain amount of attention due to the psychology of that round figure, but also the noise that we had seen in that area previously. That resistance extends all the way to the 1.26 level, and therefore any signs of exhaustion in that general vicinity should be a nice selling opportunity. The market is one that I have no interest in buying anytime soon, at least not until we break above the 50-day EMA at the very least, if not the 1.30 handle.

If we were to break down below the 1.20 level, it would more likely than not have something to do with a general panic in the markets, as everybody would be running towards the US dollar at the same time. Because of this, I think that this pair will most certainly fall given enough time, but if you can find some type of value when it comes to picking up the US dollar, that also helps the situation as well. We are in a downtrend, and there is no point in fighting it.

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