With everything the Fed has done to loosen monetary policy, the USD should be far lower. But the reserve currency is in high demand during this time of disease and civil unrest. Though it will be a back and forth, tug of war, I still believe that the USD weakens in the face of unprecedented expansion of the Federal Reserve balance sheet.
This is a short-term view of Tuesday’s price action in the $GBPUSD. After bottoming below the 1.25 level, cable managed to rally over 200 pips before topping out at 1.2688. Upon Powell’s testimony during the U.S. session, the USD rallied as traders dialed down their risk appetite with price finding support in the Fibonacci levels.
Well, this is where $GBPUSD stands just a day later:
The break below the 61.8% Fibonacci retracement level is a signal for a move lower. But that will be highly dependent on how the market reacts to the Bank of England monetary policy decision tomorrow morning.
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