GBP/USD Forecast: Looks a Bit Heavy

In summary, the British pound has demonstrated resilience recently, but the 1.2350 support level’s durability remains uncertain. 

• The GBP/USD has displayed resilience in recent trading sessions, with the 1.2350 level emerging as a potential support area.
• However, the sustainability of this support remains uncertain.
• This market appears poised to decide on whether to break out, and if it breaches the 1.2350 level, it could spell trouble for the pound, potentially leading to a sharp decline towards the 1.20 level, which serves as the next major hurdle.

It’s essential to keep in mind that the upcoming Federal Open Market Committee (FOMC) meeting scheduled for Wednesday will likely make many traders cautious. While an interest rate hike is improbable, the focus is expected to shift towards Jerome Powell’s post-meeting speech, which could significantly impact the markets. Traders are eagerly awaiting any indications of weak monetary policies, considering the recent emphasis on providing easy access to liquidity over the past 15 years.

Simultaneously, the Bank of England faces challenges linked to the European theater, raising concerns about a potential recession in Britain. Although it’s possible that the United States may eventually experience similar economic challenges, for now, it appears to be faring better than many other major players. In this environment, the US dollar may gain favor, but that doesn’t rule out the possibility of a short-term pound rally.

The 200-day Exponential Moving Average, currently positioned just below the 1.25 level, acts as a short-term resistance or “ceiling” in the market. Conversely, the 1.2350 level serves as a short-term support or “floor.” All things being equal, it is probably worth noting that Tuesday has seen yet another attempt to rally, with lackluster results. However, by the end of the day on Wednesday, we may have some answers finally.

In summary, the British pound has demonstrated resilience recently, but the 1.2350 support level’s durability remains uncertain. The looming FOMC meeting and Jerome Powell’s post-meeting speech are expected to make traders cautious, with a focus on potential weak monetary signals. The Bank of England’s concerns regarding the European theater may lead to a recession in Britain, while the US dollar remains relatively robust. This situation may favor the US dollar in the longer term, but short-term pound rallies are not out of the question. The 200-day EMA near 1.25 is a short-term resistance level, while 1.2350 provides short-term support.

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