- The GBP/USD currency pair continues to chop around as it looks for some type of directionality.
- That’s been the case with almost everything I look at recently; the markets are simply grinding accounts up without driving any type of directionality on the charts.
- The British pound has been an excellent example of a place that you don’t necessarily want to put a lot of money into, because it doesn’t know where it wants to be.
Market Keeps Grinding Away
The 50-day EMA sits just above and that could cause a little bit of resistance, but at the end of the day, it does not seem very likely to be a major factor one way or the other, as the markets have simply decided to grind back and forth against each other in order to do as much damage as possible. This is the problem with so much noise out there because we have the Federal Reserve seemingly hell-bent on muddying the waters, and the result is the charts that you see here.
The Federal Reserve has lost so much credibility that people simply do not believe that it will do what it takes to fight inflation. They probably will, but right now the market does not believe that, and as a result, you are seeing the US dollar get hit. At the other end of the spectrum, you have the British pound which is a bit of a basket case itself, so it should not be a huge surprise to see that we have absolutely no clarity here. From a longer-term perspective, you can make the argument that we have a situation where we have been very noisy and have seen a lot of chop, which can be the beginning of a trend change, but we’ve got to do more work in the bond markets. The bond markets are starting to tell the world that the Federal Reserve is going to pivot, but the Federal Reserve is refusing to say so. Inflation is supposedly going down, but it is still at extraordinarily high levels. I suspect at this point the only true losers will be the American public. That being said, Wall Street is looking for its usual handout, and given enough time Jerome Powell probably will do that. They are anticipating that it’s going to happen quicker than he is likely to do. Because of this, we will continue to hear this noise.
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