- This is an interesting pair because as I record this, they are about three hours away from the press conference after the FOMC rate decision, which is expected to be no change, but a lot of what we’ll move on next will be how people perceive.
- Jerome Powell is thinking about cutting rates or not cutting rates.
- One thing is for sure. We’ve seen a surge in US dollar strength over the last couple of days.
I don’t know whether or not it is a situation where things are decidedly switching over to the U S dollar due to trade agreements, or if it’s a situation where maybe people are just taking profit before the announcement, because if he suggests after the announcement during the press conference that the US is nowhere near cutting rates that could send the U S dollar much higher against a lot of currency. So, I think we’re getting a lot of a dollar shorting getting covered in this scenario. What I’m looking at is whether or not we are going to break down below the 1.32 level at the daily close. Then I’m short the British pound.
On a Bounce
If we turn around and bounce back above the 1.3350 level, then I think you’ve got a situation where we probably get sloppy and sideways, which would make a certain amount of sense considering that it is after all the middle of summer and summer is of course a very noisy time of year in general. So that would jive well as well.
The expectation is that we will get a rate cut coming out of the Fed in September, and if he puts the kibosh on that, it could be rather ugly for currency markets. If he doesn’t do anything to make that seem unlikely, then that could cause the bounce. We’ll just have to wait and see. But I suspect that Thursday morning you’ll wake up and this market will tell you which direction it wants to go.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.