GBP/USD Forecast: Continues its Recovery

 The US dollar did get sold off a little bit due to that announcement, but at the end of the day, the Federal Reserve is still going to be fighting inflation, meaning that they will be tightening. 

• The GBP/USD has rallied again during the trading session on Monday as we initially pulled back, but then found plenty of upward momentum.
• The overall ugliness of the market continues, but now I think there are plenty of reasons to believe that the sellers will jump in and start shorting the pound sooner or later.
• Yes, Great Britain stepped away from the idea of giving out tax schemes to the rich, but the budget situation is the least of their problems.
• This was just simply an overreaction that now has corrected itself. Whether or not we continue to see momentum to the upside is a completely different question.

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The 50-Day EMA is sitting just above the 1.15 level and dropping rather significantly. It has acted like a very strong downtrend line over the last several months, so I think we are getting close to a point of contention that a lot of people will be paying attention to. Between that and the 1.15 level, I think there are plenty of reasons to believe that the sellers are going to show up sooner rather than later. I do not believe that the British pound has hit its bottom yet.

Look for Opportunities to Pick Cheap US Dollars

Furthermore, the Federal Reserve is going to continue to tighten, even though the Manufacturing PMI numbers came out lighter than anticipated. The US dollar did get sold off a little bit due to that announcement, but at the end of the day, the Federal Reserve is still going to be fighting inflation, meaning that they will be tightening. I look at this as a potential opportunity to pick a “cheap US dollars”, and that the first signs of exhaustion I am more than willing to start shorting the British pound.

I do not think we have seen the bottom, and I think parity is a real possibility. However, we had gotten far ahead of ourselves so does make a certain amount of sense that we had a bit of a recovery. Because of this, I think a little bit of patience will go a long way, and I will be looking for my set up near the 1.15 level and on a daily candlestick. The jobs of her coming on Friday could be a catalyst to send this market spiraling.

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