By GBP/USD Forecast: Continues to Drop – 21 September 2022
The Federal Reserve has done everything it can to convince traders that they are going to tighten monetary policy, and at this point, it’s just stupidity to think anything is going to be different.
The GBP/USD has tried to rally a bit during the training session on Tuesday but gave bank gain as we cannot break above the 1.15 level. Ultimately, this is a market that I think will continue to see a lot of volatility, but more importantly than anything else, it is notable that we have seen plenty of downward pressure overtake the market from time to time.
Keep in mind that the United Kingdom is heading into a major recession, and while the United States most certainly is as well, the US dollar acts as a bit of a buffer to losses. The market participants tend to flock toward the US dollar to find liquidity, and believe it or not, there is a US dollar shortage now. This is because so many different debts out there are pricing greenbacks, so people need them for liquidity.
The 1.15 level has offered significant resistance and of course has a lot of psychological influence attached to it. The market breaking above the 1.15 level would be a bullish turn of events, but quite frankly I think there are far too many technical barriers above to break through. The 50-Day EMA currently hangs about the 1.1850 level and is dropping. That is an area that a lot of people will be paying close attention to, so any signs of exhaustion will be jumped upon.
We need to see the Federal Reserve change its attitude to see the US dollar start losing significant strength. We are nowhere near that, and would Jerome Powell send to raise rates again on Wednesday, it’s very unlikely that we see any type of longer-term sustainable relief. After all, his most recent statement was about as blunt as it could be, suggesting that “there will be some pain” when it comes to the economy. The Federal Reserve has done everything it can to convince traders that they are going to tighten monetary policy, and at this point, it’s just stupidity to think anything is going to be different. However, never underestimate the amount of stupidity that can be found out there, so we may get a bit of a relief rally based on a word or 2 of his statement before seeing the market slammed again. I have a target of 1.1250 underneath for the time being.
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