Pound/dollar got carried away in the market turmoil. The pound is not a clear “risk” currency but is certainly not a safe haven, especially after the thrill has left the pound amid falling prospects for a rate hike in the UK. However, the battle continues.
GBP/USD dropped below 1.46 and touched a new low of 1.4560, below the low levels seen in 2015 and reached levels last seen in August 2010. Yet from there, cable bounced back up and is resuming the fight for 1.46.
Market movements are quite extreme as the mood is sour: the crash in oil prices as well as a crash in China’s stock market have aggravated an already fragile situation. But this emotional swing to the dark side is not one-sided and bounces are frequent as well.
GBP/USD has a reputation as being “the devil’s currency” and we might be seeing yet another false break. What do we usually see with false breaks?
- A sweep of stops that results in a bounce back to the previous range. This could turn out into a hammer – a move to the downside only to show us a change of course.
- An initial move: We often see an initial false break to take out stops that is then followed by a second, more significant move that extends the trend.
What will it be?
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