- The British pound struggles to hold recent gains as markets refocus on the upcoming Federal Reserve decision and interest-rate expectations.
- Resistance near 1.34 persists, and broader fundamentals still lean toward U.S. dollar strength.
The British pound initially rallied against the US dollar, but you can see it is giving back some of its strength, and it does look like it's ready to roll over. That makes a certain amount of sense considering that we shot straight up in the air based on the UK budget, which at the end of the day won't influence interest rates, at least not anytime soon.
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Furthermore, you have to keep in mind that the Wednesday session, of course, is the Federal Reserve interest rate decision, which is expected to be a cut. But the question is, how bearish would they be on the economy? Will they end up being hawkish, suggesting that perhaps rate cuts aren't necessarily automatic? And if that's the case, the US dollar will find a lot more strength. At the end of the day, a lot of the leading indicators that I watch suggest that the US economy should outperform the United Kingdom. And I think eventually you will see the US dollar recover as a result.
Bearish Structure and Key Levels
This rollover was a classic bearish pattern. It looks like 1.34 is offering a bit of resistance again. But again, I think the next move will probably be based on Jerome Powell and the press conference. And the one thing that I can tell you about Jerome Powell and press conference, at least performance in the past, is that it's pretty poor. So it will probably cause chaos.
If we can break back down below the 1.32 level, then I think that confirms the downtrend, and we'll probably go lower. The Bank of England is expected to cut this month. So really, once it's all said and done, I don't know that anything will change from a fundamental standpoint. And if that's the case, then the interest rate differential remains the same as it was two months ago, meaning that we may continue to drift lower based on that alone. We'll have to wait and see. But right now, I favor the downside, but I also recognize that you can't get overly aggressive in this environment.
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