- The British Pound continues to be very choppy against the US dollar as markets at the moment don’t seem to have anywhere to be.
- After all, we are in the dead of summer and that means volatility and volume are going to dry up when it comes to the currency markets, with most currency traders focusing on vacation, and not things like interest rate differential or central bank movement.
Federal Reserve
Speaking of central banks, the Federal Reserve continues to argue with the market. The Fed Funds Futures market suggests that the Federal Reserve is going to cut several times this year, while the Federal Reserve seems to think otherwise. This has been the argument that we have seen for about a year now, as traders only know loose monetary policy, it’s not a huge surprise to see that they are struggling to remember how life was 20 years ago. There was a point where the Federal Reserve had higher interest rates than many other countries, and it wasn’t as if they cut rates just to make Wall Street happy. There had to be economic data leaning in that direction.
That being said, the economic numbers are starting to soften a bit, so there is some hope for those who are looking for the US dollar to fall again. However, if the economic situation gets worse in the United States, that typically means that things get worse elsewhere as well. In that environment, the US dollar quite often gets a bit of a boost after the initial shock, because people start to look at things like US Treasuries in order to protect their wealth. In that environment, foreigners have to sell their currency and buy US dollars so therefore it’s a bit of a self-fulfilling prophecy. Because of this, I am looking for signs of exhaustion to start shorting, as long as we stay below the 1.3350 level above. Underneath, we have the 1.3135 level offering support.
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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.