- The GBP/USD pair showed a lot of volatility Tuesday as we continue to hang around the 1.20 level.
- The area has been important multiple times, and as you can see the last several days have been quite indecisive.
- Ultimately, this is a market that is likely to be very sensitive to what happens during the Wednesday session.
Market Looks Noisy
The Wednesday session features the Federal Reserve interest rate decision, and most people expect an interest rate hike. That being said, the market is going to see a line of noisy behavior, but I also recognize that this is a market that is going to have to pay close attention to what the Fed is going to do. After all, the Fed has been very tight with its monetary policy, and that tends to make the US dollar strengthen. Rates have been climbing, and that also tends to put the US dollar at a higher level.
If we do rally from here, I believe it is only a matter of time before we would see sellers come back into this market to push it lower. The 50-day EMA sits at roughly 1.22, and I think that offers quite a bit of dynamic resistance. After that, the 1.24 level needs to be paid close attention to, as it is an area that had previously been important more than once as well.
On the other hand, if we were to break down below the 1.19 level, then it’s possible that we could drop down to the 1.18 level underneath. That being said, if we break down below there, then it’s likely that we would see the pair continue to drift lower in favor of the greenback. This would be the “risk off” scenario going forward.
I do think at the very least, we are going to see a lot of back-and-forth, as the market grinds sideways in general. Whether or not we get any breakout remains to be seen, but it is probably only a matter of time before we would see a bigger move. Once we get some type of impulse, then we can start to talk about continuing to short this market, unless the Federal Reserve changes its tune completely, which would have me have to reevaluate the entire situation.
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