After the euro made a once-in-20-year slide to parity with the US dollar, one might also ask: will the British pound be the next to cross parity with the American dollar?
The GBP/USD pair has been consistently in a downtrend since last year. Traders and investors are now on watch as technical indicators may show signs of a possible move towards the parity target.
One of the most used indicators to determine the trend and price movements is the Supertrend Indicator. This indicator is widely used for trading markets and provides buy and sell signals in a trending market.
As the name suggests, this indicator acts like a moving average or a MACD. A very simplistic way to use this indicator is to buy whenever the price closes above the green line and sell if the price closes below the red line considering the current market trend.
On the daily chart, we can see that the GBP/USD made a rebound at around 1.1800 after it made a fresh 2022 low.
With the use of Supertrend and a 200 EMA period, we can identify that the price is still in favor of moving further down. The indicator gave the initial sell signal last month for a continuation to the downside; since then, the price has tumbled even further. With this information, we might expect the price to continue moving down and possibly hit the parity target.
However, if the indicator flips to green, a possible pullback to the upside before continuing further down may also happen in the short or mid-term. If this happens, traders may want to wait for the indicator to give a sell signal before taking a position.