The British pound was all over the place during the trading session on Wednesday as we continue to see plenty of noise. Traders around the world are paying close attention to inflation in the United States, which came out much higher than anticipated. Because of this, the market is starting to look at the possibility of “peak inflation” by the time everybody went home from the European Union area.
In that scenario, the US dollar lost a little bit of strength, but to think that we have changed the overall trend is a huge stretch, to say the least. Ultimately, this is a market that I think is still very much in a downtrend, and I would love to short this market given half of an opportunity. Rallies at this point should be thought of as an opportunity to pick a “cheap US dollars”, but I think more likely than not rallies will be somewhat limited.
The 1.20 level above could be significant resistance, but I think there’s even more resistance above there at the 1.22 handle. Because of this, I’m looking to fade signs of exhaustion that occur, offering an opportunity to pick up those greenbacks. On the other hand, we could break down the lows of the trading session on Tuesday, kicking off the next leg lower. Either way, I don’t have any interest in buying the British pound over the US dollar anytime soon, and I believe that the 1.22 level will more likely than not cause a bit of resistance. If we can break above there, then it’s possible that we would have to deal with the 50-day EMA, but I’m not of the mind that it’s going to happen anytime soon.
In general, this is a downtrend that I think continues, therefore I don’t have any interest in trying to swim upriver. The Federal Reserve is going to remain extraordinarily hawkish, but it looks like a lot of the downward pressure for the announcement was already priced into the market on Wednesday. But this in mind, it’s just a matter of finding value in taking advantage of it when we rally too much. I will keep an eye on this chart, but am only presently looking at it through the prism of one direction.
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