- The GBP/USD rallied a bit during the trading session on Wednesday to reach the 200-Day EMA.
- The 200-Day EMA is an indicator that a lot of people pay close attention to, and therefore it looks like the market is using that as a bit of a resistance barrier.
- If we were to break above the 200-Day EMA, that would obviously be a very bullish sign and could open the 1.22 level.
If we break above the 1.22 level, it’s likely that the market could go looking to the 1.25 level. The 1.25 level is an area that will attract a lot of attention since the number is a large, round, psychologically significant figure, and an area where we have seen action previously. I think it is going to take a certain amount of momentum and effort to make that happen, perhaps more than the market currently has. With the FOMC Meeting Minutes coming out late on Wednesday, that might be a bit of a cause, but I think more likely than not, we will pay close attention to the jobs number on Friday.
The US Dollar is Expected to Strengthen
If we break down below the lows of the Tuesday candlestick, then it’s likely that we will see this market go to much lower levels, perhaps reaching the 1.16 level underneath. The 1.16 level is an area where we had seen a lot of resistance, so now it should offer quite a bit of support. Ultimately, this is a situation where the market will be making a bigger decision soon, and therefore think the next couple of days may determine where we go for the next couple of months.
The Federal Reserve has a tightrope to walk because quite frankly a lot of people are concerned about whether they are going to listen to monetary policy, and of course whether the US economy is going to slip into a recession. Right now, it’s likely that the Federal Reserve will stay tight, but even if they do not, it’s likely that the US dollar will pick up strength because it shows weakness, and as the United States falls economically, so does the rest of the world. In other words, I expect to see US dollar strength eventually, it’s just a matter of if it happens here, or closer to the 1.25 level.
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