GBP/USD Forecast: Bounces for Tuesday Recovery

 Ultimately, I do think that this market probably goes looking to the 1.05 level underneath where we had bounced from. 

  • The GBP/USD rallied significantly during the trading session on Tuesday as we have seen a bit of buying.
  • At this point in time, the market is going to continue to show signs of volatility, but after 4 negative days in a row, we were probably doing a little bit of a bounce.
  • Keep in mind that the market is still very much in a downtrend, and even though we have seen a bit of bullish pressure on Tuesday, I don’t think much has changed.

When you look at the 50-Day EMA, it is breaking through the 1.15 level. This is a large, round, psychologically significant figure, and now I think it all kind of ties in together quite nicely for signs of exhaustion. If we do rally toward that area and sell off again, I will not hesitate to short this market. Furthermore, you need to keep in mind that the Federal Reserve is the only thing that people are truly paying attention to, and with various inflationary and retail sales numbers coming out of the United States this week, it does make a certain amount of sense that we will see volatility picked back up.

Waiting for the CPI Number

The CPI number on Thursday is a huge event for the US dollar, and if it comes out hotter than anticipated, that will almost certainly punish this pair. I do believe that any rally now is an opportunity to short this market at the first signs of exhaustion. However, if we were to break above the 1.15 level, then we could go to the 1.17 level, followed by the 1.20 level as the 200-Day EMA is starting to resort to that area as well. Nonetheless, I think it would take quite a bit to make that happen, especially as the Bank of England continues to jump in and buy British bonds.

As we are waiting for these numbers, we may have a little bit of a drift higher as short covering begins. Ultimately, I do think that this market probably goes looking to the 1.05 level underneath where we had bounced from. The alternate scenario is that we simply fall from here, and drift toward the 1.05 level as well. As things stand right now, I don’t really have an interest in buying yet.


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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.