- The absolute insanity in the GBP/USD currency pair continues during the trading session on Tuesday, as we have reached the 1.15 level.
- The market has done a complete turnaround based upon the British government stepping away from what was thought of as a disastrous tax plan.
- That being said, a whole lot of nothing has changed from the fundamental outlook.
Fundamental Outlook and Central Banks Come in Play
The Bank of England is going to have to deal with an economy that’s going to be under energized during the winter. The British economy is almost certainly going to have a lot of issues over the next several months. We had bounced from an extremely oversold condition, and while this was a nice move higher, the reality is that it may have happened too quickly. The market will continue to be very volatile, but I think at this point we are going to start to see the British pound run out of momentum. It’s got no business being up here and I think it’s probably only a matter of time before we see some type of pullback. I do believe that we reach the 1.05 level, and it might be the horrific CPI number that we are going to see next week in the United States the kicks that off. Furthermore, we could also see the jobs number freak the market out as well. If you are buying the British pound up here, you have missed the move in the quite frankly will probably get hammered.
If we do break above the 1.1750 level, then it’s possible that you will see this market continue to go higher, but I just don’t see why anything is changed and I’m almost positive that the Federal Reserve will reiterate this rather soon. The overall added to the market has been one of absolute panic in both directions, the one thing that you will have to do is keep your position size reasonable. You do not want to go “all in” in either direction at this point as who knows what will happen in the short term? Nonetheless, we are still very much in a downtrend, but just got a little overdone in the meantime. I think this will more likely than not see the US dollar regain his strength against not only Sterling but also the euro.
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