GBP/USD Forecast: Continues Slight Recovery

Keep in mind that the Federal Reserve has several speakers that are going to be stepping out and talking over the next couple of days, so it is probably only a matter of time before we see somebody say something to shock the market.

• The GBP/USD has rallied a bit during the trading session on Friday, as we continue to see a bit of a recovery of European-related currencies.
• The market is very unlikely to completely rite the ship, because the situation for the United Kingdom remains an untenable one at best.
• Because of this, one would have to believe that the market is going to continue to see a lot of negativities when it comes to the pound itself.
• The US dollar on the other hand has a lot of strength behind it as the market will continue to focus on just rates and of course the very tight Federal Reserve.

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Keep in mind that the Federal Reserve has several speakers that are going to be stepping out and talking over the next couple of days, so it is probably only a matter of time before we see somebody say something to shock the market. If that’s going to be the case, then it’s likely that we see this pair drop right back down to the 1.11 level, possibly even down to the 1.10 level after that. All things being equal.

Noise Ahead

I think this is a market that will continue to be very noisy, so therefore you need to be cautious about your position sizing, especially as we can see massive moves suddenly pop up out of nowhere. Because of this, protecting your account must be paramount. This will be the case for almost any market you are trading right now, as we have seen so many erratic moves as of late.

If we were to break down below the 1.10 level, then it’s very likely that we see some type of major meltdown, perhaps down to the 1.05 level. I don’t necessarily think that’s going to happen easily, but longer term I could see where you can make an argument for this to happen, especially as we get closer to the cold months. The Bank of England has already suggested that we were going to see a massive recession in the United Kingdom that could last up to 2 years, so it’s difficult to see where this ends up with a positive outcome for the British pound. Furthermore, if the Federal Reserve has to fight inflation, does make a lot of sense that the US dollar would continue to be attractive.

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