GBP/USD Forecast: Continues to Dive – 19 September 2022

The US dollar has been very strong for a while, as the Federal Reserve is going to continue to tighten monetary policy. I do believe that eventually, we will see something break, and that will probably cause even more bullish momentum with the greenback. Any rally now will probably look at the 1.15 level as previous support that is going to be resistance. Ultimately, signs of exhaustion get sold into, and I just do not have a situation where I’m willing to start buying the GBP/USD.

The Federal Reserve is going to continue to be aggressive with its monetary policy, just as the Bank of England is stuck between a rock and a hard place. It’s very difficult to imagine a scenario where the British pound suddenly becomes attractive, especially as the economy of the United Kingdom is almost certainly going to go into recession. Everybody is shorting US dollars because most debts around the world are based on that very same currency. Suddenly, everybody is trying to tighten their belts, meaning that we will continue to see greenback strength. Furthermore, interest rates continue to climb, and of course, the Federal Reserve is probably going to over-tighten.

The 50-Day EMA sits at roughly 1.18 level and is dropping. Ultimately, this is a market that would look at that indicator as something important because it has been rather reliable over the last several months. My target at this point is the 1.1250 level, which may be reached rather quickly based on the momentum picking up the way it has. With this, I believe the market remains negative for the foreseeable future, as there’s just no reason to short the US dollar right now. Remember that next week the Federal Reserve has an interest rate hike coming.

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