GBP/USD Forecast: British Pound Looks Threatened

This is a very noisy market like many others, but it does most certainly favor the US dollar.

The British pound broke down Monday to slice through the 1.19 level. However, we have also seen quite a bit of noisy behavior in this market, so I do think that the market might be a bit noisy and difficult at times. Keep in mind that the currency markets are all over the place due to the Federal Reserve and its tightening policy, so it does make sense that we would see the difficulty in grabbing a hold of the market.

At this point, I still believe it is a “fade the rallies” type of situation, so we need to pay close attention to the rallies on short-term charts, because as soon as we show signs of weakness, I am more than willing to start selling again. After all, it gives you the ability to pick up “cheap dollars”, which is like getting something on sale. After all, the US dollar is by far the strongest currency in the world for a reason. The Federal Reserve is much more aggressive than other central banks around the world, so it does make sense that we will continue to see the US dollar pick up momentum.

If we rally from here, the market is likely to see the 1.22 level as a major barrier to getting above, and until we do, it’s difficult to imagine a situation where you would be a “buy-and-hold” type of investor. That being said, the Federal Reserve does change its monetary policy, or if it looks like inflation is abating in the United States, then it’s possible that we could see an attempt to turn things around. However, it looks like we are getting much worse as far as the global economy is concerned, so I think that will continue to drive the value of the greenback higher.

The size of the candlestick is relatively long, and it is worth pointing out that we had made a “lower low” during the day but are seeing a bit of a pushback. Nonetheless, it’s likely that we will continue to drop to the 1.18 level, possibly even the 1.15 level after that. Ultimately, this is a very noisy market like many others, but it does most certainly favor the US dollar.