• The GBP/USD has been relatively quiet for the most part over the last couple of months, as we are hanging around and trying to figure out what the next big move is.
• At this juncture, we now have to worry about the Consumer Price Index, because it will give us an idea as to what the Federal Reserve may do next.
• In this environment, I suppose anything is possible but if the number comes out hotter than anticipated, one would assume that it will be good for the US dollar.

The UK has a recession coming in imminently, and the Bank of England has actually been honest enough to admit this. This is unlike a lot of other bankers around the world which talk about “soft landings”, and slowdowns, but not recessions. In this market, I see the Friday candlestick of last week as being crucial, because if we break down below there then I think the market really could unwind, perhaps heading down to the 1.15 level. On the other hand, if we were to turn around and break the highs of the last couple of days on a daily close, then the 1.2450 level could very well be targeted, as it was the most recent high.
 

The market is Trying to Figure Out its Next Move

We have already had the first jobs report of 2023, and now we are about to get the first inflation report. Remember, a lot of people left the market a couple of weeks ago to celebrate the holidays, so we do not know yet how they are going to be a for this year. There are a lot of people talking about the US dollar falling, but I heard that same story multiple times last year.

Quite frankly, we could have quite a few issues that creep up and have people running towards the dollar for safety. Alternatively, that CPI never could come out softer than anticipated, and have people selling the US dollar which of course would have a bit of a “knock-on effect” over here as well. As things stand right now, it looks like this market is just trying to figure out its next move, and therefore we may have short-term choppiness followed by something that we can actually hang onto. Right now, we are still trying to figure out what that is.

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