Looking at the GBP/USD, you can see that we have initially tried to rally a bit but have also struggled at the 1.16 level. The 1.16 level is an area where we had seen noise previously, so does make a certain amount of sense that we would see it act as a little bit of a barrier. Now that we have seen this happen, it does make sense that perhaps we must focus on the 1.15 level.

Keep in mind that next week we have the Federal Reserve with a monetary policy meeting coming into the picture, and it’s likely that we will see a lot of volatility based on that. The Federal Reserve is expected to raise interest rates by 75 basis points, but it’s the statement that people will be paying the most attention to. If the statement remains very hawkish, it’s going to be difficult for the US dollar to do anything but rise. I think now, it’s very likely that we are a little overextended in the move to the upside, so I think we’ve got a situation where the market may have to correct.
 

Waiting for the Federal Reserve Decision

This has been a very nice rally over the last couple of leases, basically from an extraordinarily oversold condition. The crisis with the budget in the United Kingdom is a lot less dangerous than it once was, so does make a certain amount of sense that we have seen the pound recapture some area, but longer-term the downward trajectory makes quite bit of sense. After all, the United Kingdom must worry about things like energy this winter, and therefore it’s going to be difficult to see the economy truly take off. In fact, the Bank of England will probably have to do some type of e-zine operation.

If we do rally from here, then the 1.20 level will be the next major barrier, and above there I think you must start to think about a shift in the trend, as we could threaten the 200-Day EMA. However, it would take a lot of momentum to make that happen and would probably have something to do with the Federal Reserve changing its overall attitude on Wednesday, something that I just don’t see happening quite yet.

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