The British pound has had a strong week against the US dollar again, breaking above the top of the shooting star from the previous week. This shows that a certain amount of resistance has been broken, and it is probably only a matter of time before we go higher. Ultimately, I do think that this is a market that breaks out, mainly because the Federal Reserve doing absolutely nothing to say the US dollar. In fact, they have just this week essentially announced that the bar to raising interest rates has gotten a bit higher, and therefore a weaker US dollar should be expected over the longer term.
GBP/USD Video 31.08.20
I believe that the 1.30 level underneath is going to continue to be massive support, so I do like the idea of buying dips, because I do think that they will offer value given enough time. Longer-term, I think that we probably break towards the 1.35 handle, maybe even higher than that. If the Federal Reserve is going to continue to be this dovish, it does make quite a bit of sense that we would continue to struggle with anything along the lines US dollar strength. I think that this pair is in the midst of a major shift, and into a multi-year long-term trend. Quite frankly, if the US dollar is going to save itself, it needs to do it right here and right now. Otherwise, things will continue to look very poor for the greenback.
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This article was originally posted on FX Empire