The British pound against the US dollar exchange rate kicked off Monday's trading session with a gap higher, but quickly fell to fill the gap before rallying again. This is a classic bullish set up, but it's predicated on the idea that the Federal Reserve may not raise interest rates on Wednesday. However, there is still significant inflation in the United States, and it's unclear if the Fed will hold off on raising rates. Therefore, we can expect a lot of volatility in the FX markets.
In terms of support and resistance levels, the 200-Day EMA should offer support just above the 1.21 handle. Below that is the 50-Day EMA and the 1.20 level. On the upside, the 1.23 level has been resistance multiple times, and the double top at the 1.24 level adds to the noise in the vicinity. However, it should be kept in the back of your mind that every news announcement and whisper in the market could throw things around right now as so many people were uncertain.
All Eyes on Tomorrow's FED Announcement
- Patient trading will be crucial in this market environment as volatility and indecision are expected.
- It's best to keep position sizes small or not trade at all.
- It's uncertain whether we will find a range-bound action, given the numerous questions about the future, which is making traders uneasy about risking a lot of trading capital.
The uncertainty in the market could make the US dollar more attractive, but it remains to be seen. Even if the Federal Reserve doesn't raise its interest rates, the greenback is expected to pick up strength eventually. However, if the Fed suddenly stops raising rates, it may not be a sign of strength in the economy. A short-term knee-jerk reaction that looks bullish may not last for a significant amount of time.
Ultimately, the British pound is facing volatility and uncertainty in the current market environment. Traders should stay informed and adjust their Forex trading strategies to the changing conditions to make profitable trades, which unfortunately might be a bit difficult in this environment. Keeping position sizes small or not trading at all is a strategy that could work in this market, despite the fact that it does not sound very exciting to most retail traders. Ultimately, it's unclear whether the GBP will find a range-bound action, but there are support and resistance levels to watch out for.
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