The British pound drifted a bit lower in the early hours of Tuesday, as we await the Fed decision and statement.
GBP/USD
The British pound has fallen a bit during the early part of the trading session here on Tuesday against the U.S. dollar. As we head closer to the Federal Reserve announcement, press conference, and statement, it does make a little bit of sense that maybe traders aren't willing to put a lot of money into the market or hang on to a position that could become volatile.
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When you look at the longer-term chart here for the last roughly 16 to 18 months, you have a range that has played out between 1.3150 and 1.3650, with a little bit of overspill from time to time. You can see on the chart how sideways we've been.
This is a buy-the-dip type of market.
Because of this, I'm waiting to see if we get some type of bounce from this pullback, closer to somewhere near the 1.3250 level, especially after that announcement and press conference from the Federal Reserve. I think that would be a good sign that the pound is going to pick up, maybe see some U.S. dollar weakness, probably more pronounced here than in many other places because the Bank of England has to worry about inflationary pressures.
In turn, its currency is a little stronger than some of its contemporaries against the greenback. As far as shorting is concerned, I think it's a little difficult to do once we get close to that 1.33 level, simply because you're at the bottom of the range.
If we can break above the high of last week, somewhere near the 1.3420 level, then I think the momentum could carry this pair towards the top of the range, maybe a little closer to 1.36. If it starts to fall apart, then I'm probably going to be buying the U.S. dollar against other currencies that it might have an easier path against.
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