The British pound has rallied significantly early during the trading session, but I gave back gains yet again. At this point, the US dollar continues to be a major asset that people want to hold, as it is all about safety at this point in time. Ultimately, the US dollar continues to be one of the big winners and therefore I think you have to look towards the longer-term trend. We have seen the US dollar strengthen quite viciously against most currencies, and the British pound has little bit of catching up to do as it had been somewhat resilient previously. Because of this, I have no interest whatsoever in trying to pick up any bounce.

GBP/USD Video 31.01.22

It is very likely that the markets will respect the 50 day EMA above, which is an indicator that a lot of people pay close attention to. Furthermore, it is also at the 1.35 handle, which is an area that will attract a certain amount of attention due to the fact that it is a large, round, psychologically significant figure. Ultimately, I think you need to be very cautious, but it is obvious that the market is very much in a significant downtrend. Over the longer term, it would not surprise me at all to see this market looking to go towards the 1.32 level underneath. The markets will continue to be very volatile, but quite frankly with all of the concerns out there, I still favor cautious trading more than anything else and therefore would keep the position size small.

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This article was originally posted on FX Empire

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