GBP/USD Forecast: Turbulence During Tuesday Session

We still have plenty of support underneath that could keep this market somewhat afloat.

The British pound initially rallied on Tuesday but then turned around to fall quite sharply as Jerome Powell struggled to keep the markets from falling apart while speaking in front of Congress. He mentioned that inflation was no longer what he would call “transitory”, and traders as a result started to price in a lot of interest rate hikes in the United States. This of course made the US dollar strengthen, and as you can see, we spiked to the downside to reach down below the 1.32 handle. The large, round, psychologically significant figure seemed to have offered support, at least for the short term.

The question now is what will the currency trading public do with this information? Judging by the way that we bounced during the session, I suspect that we are not quite ready to break down, so I think that it is probably only a matter of time before the market bounces a bit. That being said, the 1.34 level is an area that should offer a significant amount of resistance as it has been important a couple of times in the past. Because of this, I think it is only a matter of time before we sell off rallies, and that is essentially what I am waiting on: a rally that shows signs of exhaustion that I could start shorting. Furthermore, I believe that the 1.34 level is only one of the barriers that we need to take out for the buyers to show strength. Furthermore, the 1.35 level above is even more resistive, so I think it is only a matter of time before the sellers get involved.

The interest rate differential between the United States and Great Britain continues to be something worth paying attention to, and now that we have seen the initial knee-jerk reaction abate, this suggests that we are going to see more of a grind lower than anything else. While at one point during the day it did look like the market was going to fall apart, it is worth noting that we recovered quite nicely, and that does suggest that we still have plenty of support underneath that could keep this market somewhat afloat. As far as buying is concerned, I have no interest in doing so at this point in time.

GBP/USD

Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.