The Pound rebounded during Wednesday’s trading session as we await the FOMC’s decision. Quite frankly, the market is going to continue to see a lot of vociferous behavior as we see whether or not the Federal Reserve is going to stay as hawkish as people assess. If they remain very stubbornly hawkish, it will more than likely boost the value of the greenback as interest rates rise. In this case, we could see the market testing the lows of the past two days, which opens up further selling towards the longer-term 1.32 level.
GBP/USD Video 27.01.22
On the other hand, if we can retake the 1.3575 handle, then it is possible that we are looking towards the 1.37 handle after that. I think at this point we will continue to see a lot of loud behavior, and of course volatility accelerating as the market tries to fix prices and something it hasn’t seen in the last 13 years without consequence, the tightening of the Federal Reserve . For this reason, you need to be very careful about your position size, as the markets will continue to be very choppy. All things being equal, it is very likely that the market will continue to price in the possibility of a drop as the greenback will more than likely continue to strengthen overall. Looking at this chart, we should have a bit more clarity in the next 24 hours as to whether or not this was a “false breakout” as we broke above the downtrend line.