Despite the recent stability in the performance of the GBP/USD currency pair with gains on the cusp of the 1.2100 resistance level, the pessimistic expectations about the future of the British economy stagnation and the disparity in the pace of interest rate hike between the Federal Reserve and the Bank of England, along with British political anxiety may bring the pair currencies selling again.

The price of the pound against the dollar GBP/USD will fall amid a “significant rise” on the part of the Federal Reserve, according to Western Union. The British Pound and the Dollar could see high volatility over the next 48 hours with the Federal Reserve expected to raise interest rates again on Wednesday and release US GDP data on Thursday.

Accordingly, analyst George Vessey at Western Union Business Solutions says that those who monitor the forex foreign exchange market should be wary of a potential “significant rally” from the Fed, as rates are raised by more than 75 basis points. Accordingly, “although it is unlikely at this point, that the dollar will rise if it surprises the Federal Reserve with a 100 basis point hike this week.”

The exchange rate of the pound against the dollar proved remarkably flexible during the past 24 hours, and settled above the level of 1.20 despite the sharp decline in the exchange rate of the euro against the dollar in response to the rise in European gas prices. Thus, flexibility is likely to persist if the Fed enters the market and delivers the expected 75 basis point rise. The analyst added, “Markets are expecting a 75 basis point rise by the US Federal Reserve (Fed) with a 90% probability of that happening. A significant 100 basis point rise is unlikely given the weak leading economic indicators and the lack of support by some Federal Reserve officials.”

He explains that interest rate speculation is the main driver of forex volatility, and a larger 100 basis point lift was soon enjoyed by money market managers after US inflation hit a new 40-year high in June and a stronger-than-expected US jobs report . This month.

Expectations for a 100 basis point rise were raised following the release of inflation data this month, which showed US inflation rose 9.1% year-on-year in June. But a number of Fed members immediately dismissed this shift in market expectations in speeches and in media appearances, which cooled market expectations.

This has since been helped by some lower-than-expected US economic data readings that indicate the US economy will slow sharply over the coming months, reducing the Fed’s need to crush activity and cool inflation by raising interest rates. Accordingly, the analyst adds, “The main economic results indicated weak growth and weaker inflation on the horizon, which led to the weakness of the US dollar last week. EUR/USD is up over 1.3% and GBP/USD is up over 1% over the week.”

GBP/USD analysis:

Amid the state of pessimism about the future of the British economy, the political situation, and the difference in the rate hike path between the Federal Reserve and the Bank of England, I expect that the next GBP/USD gains will be subject to selling again. The closest resistance levels for the currency pair are 1.2120 and 1.2230, respectively. On the other hand, according to the performance on the daily chart, the currency pair’s move towards the 1.1940 support level will confirm any bullish expectations for the pair and start expecting to test new record levels of support.

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The pair will likely keep falling as many investors start taking profit.

Bearish View

• Sell the FTSE 100 and set a take-profit at 44,000.
• Add a stop-loss at 47,000.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 46,500 and a take-profit at 48,000.
• Add a stop-loss at 44,000.

The BTC/USD pair retreated slightly on Monday and Tuesday as last week’s spectacular rally took a breather. The pair fell to a low of 45,600, which was substantially lower than last week’s high of 48,220. It remains about 33% above the lowest level in February this year.

Bitcoin Rally Fades

Bitcoin and other cryptocurrencies had a strong performance last week a investors reacted to rumours that Russia will start accepting the currency for its gas sales. The country has not yet confirmed whether such a measure is in play. Instead, the government has insisted that it will only accept rubles for gas purchases.

The BTC/USD price action has also diverged with that of American stocks. In the past few days, American shares have continued their bullish trend as investors continue buying the dip. On Monday, the Nasdaq 100 and S&P 500 indices rose by more than 0.50%.

This price action is also likely because of profit-taking considering that Bitcoin has been in a strong bullish trend. At its peak last week, it had jumped by over $15,300 from its lowest point this year.

Meanwhile, countries are gearing to implement more regulations in the cryptocurrencies sector. On Monday, the UK government that it had set out a detailed plan to exploit the potential of crytoassets and their underlying technology.

The government hopes to create a global crypotoasset hub. The move is meant to attract most companies in the blockchain industry. The same trend is happening in other countries like the United States and France.

The BTC/USD pair also declined as investors continued to worry about Tether, the giant stablecoin. According to the WSJ, short-sellers have placed bets that the price of Tether will fall. Such an action would have major implications considering that it has over $82 billions in assets.

BTC/USD Forecast

The BTC/USD pair peaked at about 48,228 last week. After that, the pair declined and reached a low of 44,310 during the weekend. It has already moved below the important support at 45,396 and the 50-day volume-weighted moving average (VWMA). The Relative Strength Index has also moved close to the oversold level of 30.

Therefore, the pair will likely keep falling as many investors start taking profit. If this happens, the next key support level to watch will be at 44,000. A move above 47,000 will invalidate this view.