We have a setup waiting to happen but it is not here yet.
- The GBP/USD currency pair initially dipped Monday to break below the 1.20 level, only to turn around and show signs of life again.
- At this point, the market is likely to continue to try to go higher, but it’s only a matter of time before we would have sellers.
- The market showing signs of exhaustion will be an opportunity to pick up “cheap US dollars.”
Approaching the FOMC
The market has been very noisy, and I think it will only continue to be so as we are getting close to the Federal Reserve meeting on Wednesday, as that announcement and press conference will certainly have a major influence on where we go next with the US dollar. Keep in mind that the US dollar is by far the most important currency in the world, so if it starts to strengthen, it will almost certainly be shown over here.
If we were to break down below the hammer from a couple of sessions ago, then the market is likely to go when a level underneath. This is an area where we had bounced from, so I think it’s likely that we will have to pay close attention to it. If we break it down below there, it’s likely that the market could go down to the 1.16 level. The candlestick is of course a little lackadaisical, but really at this point in time, it’s just more of a drift back and forth.
If we do rally from here, it’s possible that we could go to the 50-day EMA, but I think that’s about as far as this market goes without some type of change in the attitude of the Federal Reserve itself. Because of this, I think the market is going to be disappointed in the idea of the Fed slowing down, and I do think that we will see US dollar strength going forward. Where we end up going is a completely different question, but at this point in time, it’s likely that the further we go to the upside, the more real estate we have to go. The higher we go, the more interesting and exhausted the candlestick gets. We don’t necessarily have much of a setup at this point. We have a setup waiting to happen but it is not here yet.
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