GBP/USD Forecast 16/10: Can Pound Break Above 1.33?

(MENAFN- Daily Forex) The British pound continues to see a lot of noise, as the market has bounced from a large, round, psychological figure. The rising GBP is a bit of a surprise, as inflation readings in the US continue to rise, while yields fall.

GBP/USD

The British pound has rallied a bit against the U.S. dollar during the trading session here on Thursday, bouncing from the 1.32 level as interest rates in America drop, despite the fact that PPI numbers came out hotter than anticipated, just as CPI numbers did the day before.

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So, it is kind of a situation where the bond market is driving the currency markets regardless of what it should do. It is doing what it is, and bond markets are seeing U.S. rates falling, and that kills some of the idea of the U.S. dollar strengthening support level

Now, having said that, we're at the bottom of a major consolidation area. I think it does make a certain amount of sense that we would get some type of bounce from a technical analysis standpoint. The question is, can we maintain this move? I think that will come down to rates. If rates continue to drop, then sure, why not?

But I see a bit of a barrier at the 1.33 level, followed by the 50-day EMA. Underneath the current trading area, we have plenty of support from 1.32 to the 1.3150 level. Going back well over a year, that is part of what we have seen.

We will just have to see if this is an oversold bounce or if it is something with legs. The reality is, it comes down to rates. What are rates doing? They have fallen off a cliff in the last couple of days, interestingly enough, although one wonders how much longer that continues.

EURUSD Chart by TradingView

The situation certainly does not favor falling rates, but here we are. Sometimes it is just a matter of following what the market does, not what you expect it to.

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