GBP/USD Forecast: Continues to Sell Off

The market now looks as if it’s ready to continue dropping, and by target of 1.1250 was in fact hit during the day. 

  • The biggest problem with Federal Reserve days is that there’s always a group of idiots out there willing to read too much into a statement.
  • That happened during the day as we originally sold off, bounced on some type of hopium during the meeting, and then sold off yet again as the adults reentered the room.
  • Jerome Powell has made it abundantly clear that he has absolutely no interest whatsoever in trying to loosen monetary policy, and I find it quite interesting that people are just now accepting that.

The GBP/USD now looks as if it’s ready to continue dropping, and by target of 1.1250 was in fact hit during the day. That does not necessarily mean that we are not going lower, and  I think Jerome Powell reiterated that we are. However, it’s also worth noting that the market has been extraordinarily difficult to deal with, at least in other areas. The British pound itself has not been too difficult, it’s been a matter of being short of this market the entire time. Whether or not that continues to be the case remains to be seen, but  I don’t see anything keeping that from happening.

Sellers Looking to Grab Cheap Dollars

Rallies now will have a ceiling around the 1.15 level, which is a large, round, psychologically significant figure. Any playing around in that area that shows signs of exhaustion will be sold into quite rapidly as far as I can see. I do think that it is probably only a matter of time before we will continue to see sellers come in and take advantage of “cheap US dollars” on those short-term rallies, as the interest rate differential between the United States and Great Britain should continue to expand.

In fact, it’s worth noting that the British government has now been reduced to having to protect its businesses from rising energy costs. They are essentially putting a cap on energy costs for businesses to keep them from going under. This is not a recipe for an economy that’s going to suddenly take off. I do believe that it is probably only a matter of time before the British pound starts to suggest that perhaps parity is possible there, not just in the Euro. It wasn’t that long ago something like that would be unthinkable.

GBP/USD

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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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