GBP/USD Forecast: Continues to Test Major Support

• The British Pound initially did try to rally a bit during the trading session on Tuesday but gave back gains rather quickly.
• As we have seen time and time again, this market doesn't really want to break out of the area it's in at the moment.
• This does make a certain amount of sense, I suppose, considering that the markets are going to be very thin at this point in time.

However, having said that, I do believe that it is a situation where we will probably see the markets try to break down below the 1.25 level, but that might be something that we see a little bit further into January. After all, we have the jobs number coming out on the 10th, and that might be what drives things. The US dollar is still very strong, but a little bit of a bounce is not out of the question.

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The 1.2750 level, at least at this point, I think is probably your ceiling. That's assuming we can even get there. I don't have any preference in buying this GBP/USD market. I do like shorting it, but a rally and a little bit of exhaustion might make it a little bit more palatable. On a breakdown below the 1.2450 level, it's likely that we get a 1.23 and then possibly a 1.21.

Rates. As Per Usual

Interest rates in America continue to be very elevated. And it looks like the Federal Reserve might actually have to stall on the idea of cutting rates. If that's going to be the case, that should keep the US dollar higher for longer. All of that being said, it is probably worth noting that when you look at the totality of major currencies, the British pound has held up better than many others. This should not be a surprise. There's almost no difference between the interest rates of these two economies. Therefore, it's not really a swap question. It's just a strength of the US dollar question. Most of what you're seeing here probably doesn't say much about the pound. It just says that the US dollar itself is so strong everywhere around the world.

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