GBP/USD Forecast: Patiently Awaiting the Federal Reserve – 13 December 2022

The GBP/USD has done very little during trading on Monday, as markets are patiently waiting for several events this week, not the least of which of course will be the Federal Reserve rate decision on Wednesday. While anticipating a 50-basis point height, the reality is that it won’t necessarily be the interest rate decision itself, but more likely than not will be the tone of the meeting.

The 200-Day EMA sits below, pictured in blue on the chart. It should offer a bit of dynamic support, so I do think that a short-term pullback probably finds buyers sooner or later. It’s also worth noting that the market has probably seen a little bit of an overbought condition over the last couple of weeks, so it’s also possible that we could see a bit of a reconciliation of the volatility. I do think that it is a market that may have to correct itself before it’s all said and done, but at this point, I’m not necessarily willing to jump in with both feet.

The CPI number comes out early on Tuesday, and that will probably cause a short-term reaction. Whether or not it changes anything in the longer term is a completely different question, but it might cause a little bit of a move in the market.With that being said, I suspect we’ve got a situation where participants are probably killing time and waiting for some type of clarity to get involved. Until they get it, it’s very likely we have a situation where you must be ultra-careful trying to put big money to work. I would anticipate a lot of volatility over the next couple of days, but by the time we get to the end of this week, we could very well be done with big moves for the year.

After all, most traders are going to be worried about the holidays, especially as it is a well-known fact that liquidity almost always disappears in this part of the year. If this is in fact going to be the case, then I anticipate that this market may make a rather significant move by the end of the week, but we will probably just tread water after that. Raking above the 1.25 level would be a sign that we are going much higher. Until then, we still have some work to do.

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