GBP/USD Forecast: Hovering Above Crucial 1.20 Level

Christopher Lewis

This remains a “paid the rally” type of market, but perhaps more or less from a shorter timeframe than I normally trade from.

The GBP/USD currency pair continues to see a lot of noise right around the 1.20 level, an area that has been important multiple times. By hanging around this area, it shows that the market is not quite ready to break down, and therefore it’s likely that we will do more sideways action than anything else. This does make a certain amount of sense as the world is trying to figure out what central banks are going to do.

The Jackson Hole Symposium next week will almost certainly influence the markets as well, as several central bankers around the world will meet and give speeches. The British are now worrying about inflation that is running at over 10% year-over-year, although the Americans are still at 8.5%. This is a market that I think will continue to be very noisy and trying to figure out who’s going to be the more hawkish of the two.

The Federal Reserve continues to try to convince people that they are going to be hawkish, but it’s possible that they may already be looking at slowing down a bit if the June Federal Open Market Committee Meeting Minutes are to be believed. That’s obviously in the past, but that was released during the day, and it suggested that perhaps there are some second thoughts at this point.

Markets Continue to be Noisy

  • If we break it down below the 1.20 level, then it’s likely that this market will go hunting the 1.18 level underneath, an area that has a lot of previous support.
  • This is from a short-term perspective.
  • Breaking down below that level then opens the possibility of even more US dollar strength.

At this point, it looks as if the world is going into a global recession, so I think that it is probably only a matter of time before the US dollar picks up strength on any bounce. In fact, I have no interest whatsoever in trying to buy this market until we get above the 1.26 level, something that I don’t see happening anytime soon. It remains a “paid the rally” type of market, but perhaps more or less from a shorter timeframe than I normally trade from. Markets continue to be noisy, so you may need to watch interest rates in both of these countries get a bit of a heads up.

GBP/USD chart

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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.

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