- The GBP/USD bounced a bit on Friday to show signs of resiliency again, as we continue to see plenty of chop and noise in the markets overall.
- That being the case, the market is more likely than not going to continue to be an erratic place to be, but we are still very much in a downtrend.
- Keep in mind that the recovery on Friday could have been a bit of short covering, and it was a bit of a strange reaction to the jobs number that we got out of most markets, as it initially looked very bullish.
Jobs continue to be a major issue to pay attention to in America, especially as the Federal Reserve has to worry about tight monetary policy. They need to keep things tight if there is inflation, and as long as there are plenty of jobs, as evident by the JOLT numbers this week, it’s difficult to imagine a scenario where they are suddenly going to let up on the inflationary battle. This means tighter for longer, which of course Jerome Powell did everything he could to reiterate to Wall Street during the week. Whether or not traders believe him is a completely different situation, but that is part of the beast that the Federal Reserve created as they gave away free money for almost 14 years.
Looking for Signs of Exhaustion
With that being the case, if we break down below the lows of the last 2 sessions, I think it’s very likely that we continue to see downward pressure. At that point, I would anticipate that the British pound will go looking to reach the 1.10 level again. That’s an area that is a large, round, psychologically significant figure, and would attract a certain amount of attention by its very nature. Furthermore, if we break down below there then we could go down to the 1.05 level, which is a large, round, psychologically significant figure and where we had bounced from so drastically before.
With the Bank of England admitting this week that the United Kingdom is more likely than not going to have a 2-year recession, it’s difficult to find a reason to own the British pound, so I am looking for signs of exhaustion to sell as we go along. Whether or not I get that remains to be seen.
Ready to trade our Forex forecast? Here’s a list of some of the best Forex trading platforms to check out.