- The GBP/USD currency pair has gone back and forth during the trading session on Friday, as one would expect, hanging around the 200-Day EMA.
- We are currently asking questions of the 1.21 level, an area that could be somewhat definitive.
- There is potential resistance extending all the way to the 1.22 level, so it’s possible that we could see a lot of choppy behavior in this general vicinity.
Fundamental Factors This Week
Keep in mind that the market will be focusing on several different things this upcoming week, so it is worth paying attention to multiple markets and fundamental factors. The most important thing this week will probably end up being the jobs number coming out of the United States, as it could give us a little bit more information as to how the Federal Reserve may behave in the short term. As things stand right now, a lot of people are starting to question whether or not the Federal Reserve is getting closer to shutting down its monetary tightening policy, and just simply sitting where we are. That is probably a huge guess at this point, but one thing that you need to think about is the situation in the United Kingdom, causing so much pressure on the currency itself.
Just because the Federal Reserve is slowing down quantitative tightening, does not mean that they are suddenly going to loosen. Unfortunately, I think a lot of traders think that there is going to be a bit of a pivot, instead of a hold. As far as the Bank of England is concerned, they do have a lot of inflation to fight, but they also have a 2 year recession coming, so it’s going to come down to whether or not people are paying attention to interest rates, or global growth. There is an argument to be made that global growth becomes much more of a driving factor.
With a move above the 1.22 level, then it’s possible that the British pound goes looking to the 1.25 level after that. On the other hand, if the market breaks down below the 1.20 level again, then it’s likely that we could go to the 1.18 level, and then possibly the 50-Day EMA which is right around the 1.16 handle. Either way, I would expect a sizable move over the next week or so.
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