The GBP/USD has rallied slightly during the trading session on Thursday, as we are hanging around the 1.18 level. It’s worth noting that level has been a bit of a magnet for price for most of the week, but it’s also worth noting that the level is below the previous low, meaning that we are still very much in a market that is overall negative. I think at this point any time we rally, there will be plenty of people willing to jump into this market and start shorting again.
The 1.20 level above should be resistance, and I would also point out that the 50-Day EMA is racing toward that area as well. In other words, on rallies, I think there will be plenty of technical reasons for traders to get short again. On the fundamental side, the Federal Reserve will have to tighten monetary policy going forward, so the market has already started to price that in. The question is how much longer will they have to go? At this point, a lot of people will be waiting to see what Jerome Powell has to say on Friday about monetary policy and whether the Federal Reserve is getting close to pivoting.
Traders Ready to Pick Up Cheap Dollars
- I think a pivot is a bit of a pipe dream by those who were bullish on risk assets, but that does not mean that the market will not read the statement as such.
- Jerome Powell causes a long history of dropping the ball in situations, so anything is possible. Therefore, I hope this market bounces because quite frankly I’ll be able to short it at higher levels.
- Picking up “cheap US dollars” has been the trade all year, and I don’t see how those changes anytime soon. This is especially true considering that the Bank of England is already stated that the United Kingdom is going into a recession. Meanwhile, here in the United States, we just simply changed the definition of the word “recession.” It’s as if the British don’t understand this can be done!
Anyway, I digress. At this point, I either fade rallies or celebrate down, because I believe that the British pound is going to find its way down to the $1.15 level. That’s not going to be quick or easy, but I think we continue to grind the way we have been over the last several months.
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