- The British pound has been very bullish for some time, and it's interesting that during the trading session on Tuesday, we've seen more of the same, despite the fact that we've seen a lot of hesitation recently.
- That being said, I think we've got a situation where the 1.30 level now suddenly comes into focus, and a break above there could really send the British pound flying against the US dollar.
We are hanging around the 61.8% Fibonacci retracement level, so I would anticipate that there is at least a little bit of hesitation here. But also, I would point out that there is a pretty significant consolidation area right around this region as well. With this, I think you've got a scenario where we probably continue to see a lot of back-and-forth trading in this area, but again, I'd be watching that 1.30 level very closely.
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Federal Reserve
A lot of this comes down to the idea that the Federal Reserve is going to cut interest rates multiple times this year, and while they may or may not, the reality is that the inflation outlook in America is still a bit murky. The next couple of months are anticipated to bring a recession in America, but after that, there are a lot of things suggesting that inflation will come right back.
So, it'll be interesting to see what the Federal Reserve has to do then. While interest rate cuts are probably coming, the question then becomes whether or not there will be as many as the market expects. If not, then we'll see this market turn right back around, would be my guess. All things being equal, we are a little extended, so it will be interesting to see whether or not we go sideways or if we finally break out to the upside. A breakdown below the 1.2850 level could kick off a little bit of a pullback, but right now that doesn't look as likely.
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