- The British pound surged sharply as traders bet against the US dollar, but uncertainty dominates as shifting momentum, upcoming Federal Reserve decisions, and volatile sentiment keep the broader trend unclear, making caution essential across currency markets.
- The British pound has exploded to the upside during the trading session on Wednesday as people are betting that the US dollar is going to implode.
- That being said, this is a market that is still in the process of trying to determine whether or not the trend is changing, and we are seeing a lot of noise. The question at this point isn't so much whether or not the market can rally, but how far it can actually rally after all?
We have a market that has broken down significantly, but technical analysis has failed us so far as we are now back above the previous support level, and it looks like it's going to be lost for a while. Keep in mind that the Federal Reserve has an interest rate decision coming out on Wednesday of next week, and that will have a major influence on what happens next.
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Volatility Around the Dollar Outlook
Ultimately, this is a market that is still trying to figure out whether or not the US dollar is going to strengthen or weaken. But it looks to me as if right now the wild swings continue in momentum and attitude. As long as that's the case, you are going to have to be very cautious trading not only this pair, but any pair, because it would only take some conversation from Jerome Powell during the press conference to turn this thing right back around.
Leading indicators suggest that the United States should outperform most other economies around the world in early 2026. That's why I am a little bit leery of getting too aggressively short the US dollar against most currencies. I do think eventually we'll see some exhaustion. In the next couple of days, we're probably going to see more volatility and shenanigans than anything else.
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