- The GBP/USD rallied a bit during the trading session on Friday, even though inflation numbers in the United States came out a little bit hotter than anticipated.
- Because of this, the market saw a little bit of a slam lower, but that knee-jerk reaction was turned around almost immediately, now it looks like we are going to threaten an even bigger breakout.
- At this point, it looks as if the British pound is going to go looking to the 1.25 level.
Looking at the chart, you can see that there is an up-trending channel, and it seems like we are just following right along. The 200-Day EMA sits just below and offers a lot of support. At this point, the market continues to be very noisy, but it does look like we continue to focus on the idea of interest rates dropping in America. If that continues to be the case, then I would anticipate that the British pound is a beneficiary by default. However, next week could be a completely different situation.
Pay Attention to the FED
Pay close attention to the Federal Reserve on Wednesday because they will most certainly have a major influence on what happens with the US dollar. After all, people are expecting the Federal Reserve to raise by 50 basis points, but a lot of what will determine what happens next is going to be based upon the statement and further forward expectations coming out of the Fed. I look at this chart and recognize that we are in a nice gentle uptrend, but whether we have completely changed the longer-term trend probably remains to be seen.
Keep in mind that there’s a little bit of window dressing going into the end of the year, and therefore seems to favor buyers overall when it comes to risk assets, so the real question will be what happens in January? On the other hand, if we turn around and break down below the 200-Day EMA, then we could go down to the 1.20 level, and then eventually the 50-Day EMA. All things being equal, it does look like it’s favoring the upside, but I don’t necessarily think that we're going to see an explosive move higher anytime soon as there are still a lot of questions out there about the global economy.
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