GBP/USD Forecast: Bounces From the 200-Day EMA Again

We do know that the Federal Reserve is going to be a bit hawkish going forward, but the question to this point is going to be just how aggressive are they going to end up sounding?

The GBP/USD pair has bounced from the 200-Day EMA again on Wednesday, as we continue to consolidate ahead of a crucial Federal Reserve meeting next week. We do know that the Federal Reserve is going to be a bit hawkish going forward, but the question to this point is going to be just how aggressive are they going to end up sounding?

As things stand right now, it’s likely that we could see a 50 basis point interest rate hike, and of course, Jerome Powell recently has caused all kinds of problems in the markets as he seemingly can’t keep his mouth shut, or perhaps better put he can get his point across. While he sounds hawkish one minute, as soon as he goes off script, he mucks everything up. Because of this, the market has gone straight up in the air against the dollar for a while, but at this point, we must question whether or not the market is due for some type of major correction.

We Are Going to Grind Back and Forth

I do think this point in time we have a market that prefers to go higher, but that does not necessarily mean that we are going to go straight up in the air, or that the market will even get what it wants to get. After all, if we continue to see a little bit of concern out there, then the US dollar will be attractive yet again. However, if we turn around and take out the 1.230 level on a daily close, then it’s possible that we could be looking at the 1.250 level.

The market has had a great recovery, but the question at this point is whether or not the ECB is going to be able to remain hawkish enough to overcome the US dollar, but at this point, we also have to keep in mind that not only is the Federal Reserve offering higher rates in America, but they are going to stay tight much longer than the ECB will be able to. The market is currently in the channel that you should be aware of, but if we break through that channel that could be the signal that we are perhaps ready to run back to the greenback. Until then, you have to assume that we are going to grind back and forth and slightly higher.

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.