We have been doing very little in the GBP/USD over the last couple of weeks, hanging around between the 50-Day EMA and the 200-Day EMA indicators. It seems as if we finally made a bit of a decision on Thursday, as the ADP employment figures came out much hotter than anticipated. This has people thinking that the Federal Reserve will have to remain very tight for the foreseeable future, something that quite frankly the Federal Reserve has been shouting for months.
Market participants now look forward to the jobs number on Friday, which people fear could be rather hot. If that’s the case, then the Federal Reserve is likely to have a tight monetary policy through the rest of the year based on what they have been saying. I have no reason to doubt that the Federal Reserve is going to continue to fight inflation and worry a lot less about stocks and currency markets. On a breakdown from here, the British pound could be looking at a move to the 1.15 level, which is an area in that we have a large, round, psychologically significant figure, and of course, had previously seen a bit of resistance.
Waiting for the Job Numbers
On the other hand, if we turn around and close above the 200-Day EMA on a daily candle, then we could go looking to the 1.22 level, which then opens up the possibility of a move to the 1.25 level. I don’t necessarily think that is going to be easy or may not even be likely, but it is a scenario that we need to keep in the back of her mind. Regardless, it looks as if the British pound is starting to favor selling pressure, so I would most certainly keep that in the back of your mind when you go to press buttons.
The jobs number will obviously have a major outsized impact, and the way we reacted to the ADP number, I think that has become even more apparent after this session. I don’t necessarily think that it’s going to be some type of major meltdown, I just think that the British pound got way ahead of itself, so it’s very likely we could have a little bit deeper correction at this point. It seems as if we have been waiting for some type of reason to get moving, and we may have just found it.
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