- The GBP/USD rallied a bit during the trading session on Tuesday as the CPI number in the United States came out of 7.1% year-over-year, as opposed to the anticipated 7.3%.
- Because of this, people started to look at the idea of the Federal Reserve shifting away from a tight monetary policy as being possible.
- 7.1% year-over-year inflation is still outrageous, and there’s absolutely no way that the Federal Reserve is going to change its course.
You can already start to see that the market is giving up some of these gains, but ultimately, I think it’s probably only a matter time before we must sit down and listen to the Federal Reserve on Wednesday because it obviously will have a major influence as to where we go next with anything that is priced in the US dollar. The 200-Day EMA sits near the 1.2050 level, and that’s an area where I think you would start to see some interest in buying. If we were to break down below there, then it’s likely that we could see this market drop down to the 1.20 level, and then perhaps even lower than that.
The next Couple of Days Should be Very Noisy
On the upside, the 1.25 level could be an area of resistance, and if we can break above there, then I think the British pound can continue to go much higher. Obviously, we should get a little bit of noise after Jerome Powell makes his speech and answers his press conference questions, which is followed on the very next day by the European Central Bank meeting, which will also have a major influence on the dollar. The next couple of days should be very noisy, but hopefully, they will be decisive.
Unfortunately, right after we get through all this, we then have liquidity disappearing from the market as we start to see traders pay more attention to holidays than trading. Because of this, think is a situation where we are going to continue to see a lot of choppiness, but if interest rates start to rise in America again, that will almost certainly turn this market back around. Be cautious, the next 2 days could decide where we go in the US dollar for the next several months, so that obviously is going to be crucial.
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