• The British pound has drifted a little bit lower against the US dollar during the trading session on Tuesday to break down below the crucial 1.3350 level.
• However, we bounced a little bit from underneath there.
• And I think what we are doing right now is setting up for the Wednesday session./

The Wednesday session features the Federal Reserve and the interest rate decision as well as the press conference and statement. At this point, the Federal Reserve is not expected to cut rates. And now the question will be what's the tone of the statement and press conference. If it becomes abundantly clear that the Federal Reserve isn't even thinking about cutting later this year, that could very well send this pair lower due to the US dollar strengthening overall.
 

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On a Drop Lower

If we drop here, I'd be watching the 200 day EMA at the 1.3133 region. If we rally from here, the 50 day EMA is a very interesting place for me as it is the 1.3466 level, but it's also right there at the uptrend line. It's not until we break above that I'd be comfortable buying again, just as I'd like to see a sustained break lower to start shorting.
 

If we break the 200 day EMA, it's lights out for the British pound and the US dollar is probably rallying significantly against multiple currencies, not just the British pound, because the British pound has been one of the better performers against the US dollar. So, if this market is falling, the other ones are shrinking in the face of the US dollar as well. All things being equal, you could make an argument for a head and shoulders pattern. Although I see a lot of noise just below it, I'm not that excited about it just from the candlestick formation aspect. At the end of the day on Wednesday, we may have quite a bit more clarity.

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