- The British pound is trying to break out against the US dollar during Monday trading as it looks like we are in fact going to continue to be very noisy.
- You do have to keep in mind that we have an interest rate decision from both of these central banks, the United States and England this week. And that in and of itself could cause quite a bit of volatility.
- With this, I think you also have to recognize that we are in a scenario where traders are trying to sort out whether or not the Federal Reserve cutting rates is a good thing or if it is a bad thing.
Generally speaking, most stock traders and forex traders look at rate cuts as a good way to short the dollar. The question at this point is going to be more along the lines of “Is there something ugly out there that the Federal Reserve knows that we don't?” That's always the fear. Ultimately though, you'll also have to pay attention to London on Thursday.
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A Noisy Market Ahead
So, I think this ends up being a very noisy market. I do think it favors the upside as things stand right now. And if we can get a sustained break above the 1.36 level, we could very well see the market try to get to the 1.38 level, but we also probably will see the occasional erratic and violent pullback.
So that is something to be cognizant of. If we do pull back, I would anticipate the 50 day EMA offering support, which is at the 1.3477 level. And then after that, you would have support at the 1.34 level. In general, I like buying dips, but you never know. The Federal Reserve could spook the market, so be very cautious.
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