British Pound Stabilizing Near 1.35 Ahead of the FOMC

The British pound has bounced around during the course of the trading session on Wednesday, as we are waiting for the FOMC decision. Quite frankly, the market is going to continue to see a lot of noisy behavior, as we will see whether or not the Federal Reserve is actually going to remain as hawkish as people are pricing in. If they do remain very stubbornly hawkish, that will more than likely lift the value of the greenback, as interest rates will rise. With that being the case, we could see the market test the lows of the last couple of days, which opens up fresh selling to go towards the 1.32 level over the longer term.

GBP/USD Video 27.01.22

On the other hand, if we can recapture the 1.3575 handle, then it is possible that we go looking towards the 1.37 handle after that. I think at this point in time we will continue to see a lot of noisy behavior, and of course volatility picking up as the market try to price and something that it has not seen in the last 13 years of any consequence, the Federal Reserve tightening. Because of this, you need to be very cautious about your position size, as the markets will continue to be very choppy. All things being equal, the market is very likely to continue to look at the possibility of breaking down, as the greenback will more than likely continue to strengthen in general. Looking at this chart, we should have quite a bit more clarity in the next 24 hours as to whether or not that was a “false breakout” as we broke above the downtrend line.

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