Will Chinese DeepSeek Disrupt NVIDIA?

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The global AI race has taken an intriguing turn with the emergence of China’s DeepSeek, touted by some as a potential disruptor to NVIDIA’s dominance in the AI hardware space. As speculation swirls, stock investors, analysts, and thought leaders are left grappling with the critical question: Is DeepSeek a genuine threat to NVIDIA and the broader American AI industry, or is this a case of overhyped news amplified by interested parties?

The news that DeepSeek’s model surpassed OpenAI’s o1 in specific reasoning tests has sparked intense debate within the AI community. This development has significant implications for the AI market, potentially impacting the stock prices of companies like NVIDIA and other AI-related companies.

I’ll preface this by saying that I am not a renowned expert in deep technology or AI hardware. I don’t claim to have a definitive answer. Instead, I propose a method to find the answer—not by theorizing endlessly but by observing how the stock market reacts. The stock market, with its collective wisdom and ability to process information, often acts as the closest thing we have to a truth detector.

Let’s explore the context, evaluate the key factors at play, and develop a logical framework to assess the significance of DeepSeek’s emergence.

The Landscape: NVIDIA’s Moat vs. DeepSeek’s Promise

NVIDIA has long been the undisputed leader in AI hardware, leveraging its GPUs and CUDA software ecosystem to dominate the market. Its ecosystem is sticky—developers, hyperscalers, and enterprise clients are deeply entrenched in its platform, creating significant switching costs. This is not unlike Apple’s ecosystem, where loyal users and interconnected services create barriers to exit.

DeepSeek, on the other hand, reportedly offers a more cost-efficient AI solution. The analogy some have drawn is that DeepSeek could be the “cheaper smartphone” to NVIDIA’s “iPhone.” In the smartphone industry, the availability of cheaper alternatives has undeniably shifted market share, particularly in emerging markets. But did this disrupt Apple’s stock price or its dominance among its loyal user base? Not significantly. The same could apply to NVIDIA, depending on whether DeepSeek can replicate NVIDIA’s ecosystem or merely compete on price and performance.

The Role of Market Reactions: Finding the Answer in the Price

Here’s where the stock market comes in. Instead of relying solely on speculative opinions, I suggest that the best way to gauge the impact of DeepSeek is to observe NVIDIA’s stock price. The stock market is often a better truth-teller than any single analysis. It reflects collective sentiment, informed by analysts, insiders, and countless external factors.

What to Watch:

  1. The Reaction to the News
    Since the DeepSeek news broke, NVIDIA’s stock has not shown any drastic reaction. It actually rose apx 2.5% after the news came out, if we look at NVDA stock price from the next day it traded, to the close of the week. This lack of significant movement, not to mention lack of stock price decline (crash…?) — suggests that the market does not yet see DeepSeek as a significant disruptor. If it were, we would expect a sharp and sustained price decline. Who remembers other cases, such as Facebook’s Cambridge Analytica scandal a few years ago and the immediate FB stock decline?

  2. Earnings as a Catalyst
    NVIDIA’s upcoming earnings report will be pivotal. Pay close attention to management’s commentary, particularly regarding competitive risks in the AI space. If DeepSeek is a genuine threat, it could show up in NVIDIA’s guidance or performance, especially in its data center segment. I propose observing NVIDIA’s stock price from the time the news broke until two weeks after earnings. This period should provide enough data to assess whether DeepSeek is having a tangible impact, even if will not be talked about. The price knows, and it almost always knows better than you, or anyone else.

Interpreting the Price Action Post Upcoming Nvidia Earnings (Scheduled for 26 Feb 2025): What It Might Tell Us

NVDA stock price is your best guide to the “truth”

Scenario 1 for the Upcoming Nvidia Earnings Report: Stock Rises or Remains Stable

If NVIDIA’s stock rises or stays within its current range, the market is likely signaling that DeepSeek is not a major disruptor. Perhaps NVIDIA’s ecosystem is too entrenched, or DeepSeek’s solution doesn’t offer enough differentiation. It’s also possible that other factors, such as AI demand growth or NVIDIA’s new Blackwell chips, outweigh any competitive threats.

Scenario 2 for the Upcoming Nvidia Earnings Report: Stock Declines

If NVIDIA’s stock declines, the reasons warrant closer examination. Is the drop due to bottlenecks in Blackwell chip deliveries, macroeconomic pressures, or broader market trends? Or does it reflect legitimate concerns about DeepSeek? Analysts will need to scrutinize earnings commentary, data center revenue trends, and any shifts in market share. It’s critical to avoid jumping to conclusions without understanding the underlying reasons for the decline.

The Unknowns: Factors and Their Weights

One of the challenges in analyzing stock movements is that we can never know all the factors affecting a stock price, nor the relative weights of those factors. We might think we know, we may hear great explanations, but we don’t exacly know. Earnings reports often illustrate this: a company might beat revenue and EPS estimates, yet the stock declines. Analysts scramble to explain why—was it slower sales growth, weaker guidance, or some other reason? The reality is that the stock market processes countless variables simultaneously, and not all of them are visible to us. The granular variables and their weights will never be known to us. But price knows.

The same principle applies here. Even if NVIDIA’s stock remains stable, it’s possible that DeepSeek is a growing threat but not yet significant enough to outweigh other factors. Conversely, if the stock declines, DeepSeek may not be the primary cause. This complexity is why I emphasize looking at the stock price holistically and over time, rather than rushing to judgment based on short-term moves.

Seeking the Deep Behind DeepSeek: Trust the Price, Not the News

DeepSeek’s potential to disrupt NVIDIA and the American AI industry is an open question, but the best way to find an answer is to let the stock market speak. Watch NVIDIA’s price action from the time the news broke until two weeks after its upcoming earnings. If the stock remains stable or rises, it’s likely that DeepSeek is not a significant threat. If it declines, dig deeper into the reasons—whether they’re related to DeepSeek or other factors.

While price action can act as a “truth detector,” it’s not infallible. The market may not immediately price in all information, and short-term movements can be influenced by noise, speculation, or interested parties (e.g., short sellers amplifying fears about DeepSeek). As always, exercise caution and remain open to multiple interpretations. But do follow the price more than anyone’s opinion, especially yours.

Ultimately, the price knows. Follow the money. Follow the price and you shall be closer to finding the truth.

So far, here is the most simple price chart of NVDA stock within the past 100 days. I don’t any panic yet from the “truth machine”, do you? You can decide for yourself is you see any DeepSeek news related panic. But let’s wait till 2 weeks after the next earnings to unveal further “truth”.

NVDA trading range: $127-$152 (100 days). Weekly chart.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Always do your own research and consult with a professional before making investment decisions.

Weekly Market Outlook (27-31 January)

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UPCOMING
EVENTS:

  • Monday: China PMIs, German IFO.
  • Tuesday: US Durable Goods Orders, US Consumer Confidence.
  • Wednesday: Australia Q4 CPI, BoC Policy Decision, FOMC
    Policy Decision.
  • Thursday: Eurozone GDP and Unemployment Rate, ECB Policy
    Decision, US Q4 GDP, US Jobless Claims.
  • Friday: Tokyo CPI, Japan Unemployment Rate, Japan
    Industrial Production and Retail Sales, Swiss Retail Sales, France CPI,
    German CPI, Canada GDP, US Core PCE, US Q4 ECI.

Tuesday

The US Consumer
Confidence is expected at 106.0 vs. 104.7 prior. Last month, consumer confidence dropped to 104.7 vs. 112.8 in
November.

Dana M. Peterson,
Chief Economist at The Conference Board said: “The recent rebound in consumer
confidence was not sustained in December as the Index dropped back to the middle
of the range that has prevailed over the past two years”.

“While weaker
consumer assessments of the present situation and expectations contributed to
the decline, the expectations component saw the sharpest drop. Consumer
views of current labour market conditions continued to improve,
consistent with recent jobs and unemployment data, but their assessment of
business conditions weakened.”

This might have
been just an outlier among lots of upbeat economic data. Overall, we are
still in the range that has prevailed over the past two years, and we
haven’t got any strong catalyst that could suggest a sudden weakening in the
economy.

US Consumer Confidence

Wednesday

The Australian Q4
CPI Y/Y is expected at 2.5% vs. 2.8% prior, while the Q/Q measure is seen at
0.3% vs. 0.2% prior. The RBA is focused on the underlying inflation figures
with the Trimmed Mean CPI Y/Y expected at 3.3% vs. 3.5% prior, while the Q/Q
reading is seen at 0.6% vs. 0.8% prior.

As a reminder, the
RBA softened further its stance at the last policy decision as it nears
the first rate cut. The market is seeing a 54% chance of a 25 bps cut in
February although the first fully priced cut is seen in April.

The latest Australian Employment report came in a touch softer than expected but
didn’t change much in terms of market pricing which was influenced more by the
recent Australian Monthly
CPI that showed core
inflation easing with the Trimmed Mean CPI Y/Y coming in at 3.2%.

A soft Q4 CPI
report will likely see the market sealing a rate cut in February already, while higher than expected figures might
keep it on the edge with the probabilities favouring an April action.

Australia Trimmed Mean CPI YoY

The BoC is expected
to cut interest rates by 25 bps and bringing the policy rate to 3.00%. As a
reminder, the BoC cut interest rates by 50 bps at the last policy meeting but dropped the line saying “if the economy evolves broadly in line with
our latest forecast, we expect to reduce the policy rate further”, which
suggests that we reached the peak in “dovishness” and the
central bank will now switch to 25 bps cuts and will slow the pace of easing.

The recent Canadian Employment report was much stronger than expected, while the CPI report came mostly in line with forecasts showing once again
that the central bank got inflation back under control.

The CAD
hasn’t responded much to economic data recently as the focus switched to
Trump’s tariffs threats and
the negative economic impact they could have on Canada. Trump said that he
intends to impose 25% tariffs on imports from Canada as soon as February 1st.

Despite the
general US Dollar weakness on tariffs optimism triggered by soft Trump’s
comments on China, the Canadian Dollar underperformed significantly its peers
with the USD/CAD rate remaining stuck in a roughly 150 pips range.

Bank of Canada

The Fed is
expected to keep interest rates unchanged at 4.25-4.50%. As a reminder,
the central bank cut interest rates by 25 bps at the last meeting in December
raising growth and inflation projections and lowering the expected rate cuts in
2025 from 100 bps to 50 bps (in line with market’s pricing at that time).

The central
bank will likely stress the need to wait a bit more for the next rate cut to
get more economic data and more clarity on Trump’s policies. As Fed’s Waller recently mentioned, the pace of rate cuts will
depend on inflation progress. He didn’t even rule out completely a March cut which was taken as a dovish surprise by the market.

The recent US
inflation data came in softer than expected and marked the peak in the
inflation hysteria and the repricing in rate cuts expectations. Before the
data, the market was even pricing in the chances on no rate cuts in 2025.

That was the
signal that the pricing was getting too much aggressive and in fact we just
needed a couple of benign inflation reports to get it back to price in almost
two rate cuts by the end of the year (which would be in line with the latest
Fed’s projections).

Overall, this
decision is unlikely to influence markets expectations too much as the data in
Q1 is what really matters. Despite the expected cautiousness, a bit more
positive talk on inflation could see the US Dollar weakening further (as
long as Trump doesn’t spoil the party).

Federal Reserve

Thursday

The ECB is
expected to cut interest rates by 25 bps and bring the policy rate to 2.75%.
The recent Eurozone CPI report showed core inflation remaining pretty
sticky, especially on the services side.

Moreover, despite
all the doom and gloom, the latest Flash PMIs showed a notable rebound in economic activity which might even get stronger if the Russia-Ukraine
war gets settled.

Also, news on EU to push AI, advanced research and clean tech in bid
to compete with the US and China got louder with pressures to reduce and
simplify regulations and increase investment. The prospects of a great 2025 for
the Euro and European equities strengthen by the day.

European Central Bank

The US Jobless
Claims continue to be one of the most important releases to follow every week
as it’s a timelier indicator on the state of the labour market.

Initial
Claims remain inside the 200K-260K range created since 2022, while Continuing Claims continue to hover around
cycle highs although we’ve seen some easing recently.

This week Initial
Claims are expected at 220K vs. 223K prior, while there’s no consensus for Continuing
Claims at the time of writing although the prior release showed an increase to
1899K vs. 1853K prior.

US Jobless Claims

Friday

The Tokyo Core CPI
Y/Y is expected at 2.5% vs. 2.4% prior. The BoJ hiked interest rates by 25 bps
the last week but didn’t offer anything in terms of forward guidance with Governor
Ueda saying that they have any preconceived idea and that they will make a
decision at each policy meeting by examining economic and price developments as
well as risks. The market doesn’t expect another rate hike any time soon
with the next one seen in October at the earliest.

Tokyo Core CPI YoY

The US PCE Y/Y is
expected at 2.6% vs. 2.4% prior, while the M/M measure is seen at 0.3% vs. 0.1%
prior. The Core PCE Y/Y is expected at 2.8% vs. 2.8% prior, while the M/M
figure is seen at 0.2% vs. 0.1% prior.

Forecasters
can reliably estimate the PCE once the CPI and PPI are out, so the market
already knows what to expect. Therefore, unless we see a deviation from the expected numbers, it
shouldn’t affect the current market’s pricing.

US Core PCE YoY

The US Q4
Employment Cost Index (ECI) is expected at 0.9% vs. 0.8% prior. This is the most
comprehensive measure of labour costs, but unfortunately, it’s not as
timely as the Average Hourly Earnings data. The Fed though watches this
indicator closely.

US Employment Cost Index

What are the technicals driving the major US currency pairs heading into the new week

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EURUSD: The EURUSD stretched above a retracement (61.8% from the December high) /ceiling area today, increasing the bullish bias. That area came between 1.0448 and 1.0461. That area will be a key barometer in the new trading week. You can read the commentary HERE and watch the detailed video below:

USDJPY: The USDJPY remains in an up-and-down range over the last week and a half between 154.77 and 156.73. Also in play at the lower end is the 38.2% retracement at 154.939. The price briefly broke that key retracement but momentum to the downside faded fast. You can read the commentary HERE and watch the detailed video below:

GBPUSD: The GBPUSD was the biggest mover on Friday with a run to the upside. That broke the pair past the 38.2% and the 50% retracement targets of the trend move lower from the December high at 1.23689 and 1.2453 respectively. You can read the commentary HERE and watch the detailed video below:

USDCHF: The USDCHF tested but stayed below the 100 hour MA on Tuesday, extended above that 100 hour MA but stalled at the higher 200 hour MA and fell on Thursday, and extended to test the 100 hour MA on Friday, and stalled against that resistance level. Sellers were leaning on rallies. What it did not do is extend below the 38.2% of the move up from the December low. So buyer and sellers are battling it out. You can read the commentary HERE and watch the detailed video below:

USDCAD: The USDCAD is in a wide up and down trading range between 1.42899 and 1.4466 (177 pips) going back to December 17. This week off of the inauguration volatility (and tariff stuff), the buyers had their shot on a break higher and failed, AND on a break lower, and also failed. The price is settling within the range but below 100 and 200 hour MAs giving a bearish tilt into the weekend. You can read the commentary HERE and watch the video below:

AUDUSD: The AUDUSD extended above a ceiling area and the 38.2% of the move down from the November 25 high on Friday (between 0.62874 and 0.6306). The corrective low on Friday found willing buyers against the high of that swing area. The buyers are making a play. Can they keep it going next week. You can read the commentary HERE and watch the video below:

NZDUSD: The NZDUSD extended above the 38.2% of the move down from the November 29 high and a swing area ceiling all between 0.5683 and 0.5691. The break is a tilt to the buyers/bulls heading into the new trading week. Can the buyers keep the momentum going in the new trading week? You can read the commentary HERE and watch the video below:

USD/INR Forecast: US Dollar Continues to Flex Against the Rupee

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  • The US dollar continues to go back and forth against the rupee near the 86.60 level as the market consolidates after a huge run higher.
  • There have been a lot of problems in India as of late, not the least of which of course would be inflation.

It looks like the 87 level is going to form a bit of a ceiling, and perhaps buyers of the dollar against the rupee are gauging whether or not they are going to continue to go higher or if they are just simply going to digest the gains. Short term pullbacks at this point in time could open up a move down to the 86 level.

With the US dollar being as strong as it has been, it’s really difficult to imagine whether or not the market would suddenly turn against the greenback and run to the rupee. I think the best case scenario for the rupee at this point in time is just to simply go sideways. If the US dollar were to break above the 87 level, that could open up a move to the 87.50 level, and possibly even beyond. As far as selling this pair is concerned, I don’t have any interest because quite frankly, I don’t want to sell the US dollar against anything, let alone emerging market currencies.

A Lot of Issues in India

USD/INR Forecast Today 24/01: USD Flexes VS Rupee (Chart)

Inflation in India, foreign capital outflows, and even higher oil prices are all starting to factor into this market as the Indian economy is almost certainly going to feel some pressure here. I am a buyer of dips when it comes to the dollar against the rupee. This is a market that has been bullish for quite some time, and until there is a reason to sell the USD against bigger currencies, there is almost no chance for the emerging markets like this one.

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USD/CHF Forecast: US Dollar Continues to Climb Against the Swiss Franc

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  • The US dollar rallied a bit during the trading session here on Thursday, as it looks like the 0.91 level is being targeted.
  • If we can break the market above here, and I don’t see any reason why we can’t, then we will start to ask questions to 0.92.
  • The 0.92 level has been a very important level multiple times going back to about March of 2023, so if we can break above that level, it would be a very bullish sign.

This is a very difficult barrier to get beyond though for the USD/CHF pair, and I am aware of that, but from a fundamental analysis standpoint, there’s no reason to think that we can’t eventually get above there.

After all, the Swiss National Bank recently just cut interest rates by 50 basis points in a bit of a panic move, and at the same time, you have the Federal Reserve in the United States probably staying tighter for longer with a higher interest rate than Switzerland. So, you get paid at the end of every day and you also have to keep in mind that the US economy is running really hot and that will continue to be the story here with President Trump in office, it will be a very pro-business administration. So, one would have to think at least for the time being, you are going to continue to see a lot of money flow into the United States.

Currently, in Switzerland

USD/CHF Forecast Today 24/01: USD Continues to Climb (Chart)

Contrast this with Switzerland, which although a safe haven region, the problem Switzerland has is that something along the lines of 80% of its exports go to the European Union. The European Union has been a bit of a basket case over the last couple of years, and especially over the last six months. As long as that’s the case, the Swiss, unfortunately, are surrounded by failure. I believe this pair continues to go higher over the longer term.

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Nifty 50 Forecast: Is the Nifty 50 Building a Base?

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  • The Nifty 50 rallied slightly during the trading session on Thursday, but we still find ourselves hanging around the 23,000 rupee level.
  • I think at this point in time, there is a large consolidation area that could offer a certain amount of support, probably all the way down to about 22,000 rupees.
  • So, with that being said, I think you have to look at this as a market that could very well find buying in this area.

I would pay close attention to the 200 day EMA, which sits right around the 23,650 level, because of course is an area that a lot of people will pay attention to from a technical analysis standpoint and it’s also worth noting that the 50 day EMA is starting to drift towards that level so, you could get the so-called death cross. It’s normally really late and I don’t like that indicator, but it is one that will cause a reaction from some people.

If We Were to Break Higher

Nifty 50 Forecast Today 24/01: Building a Base? (Chart)

If we can clear both of those moving averages, then I think the market is looking at the 24,800 rupee level. This will more likely than not be a bit of a scenario where we are trying to find some type of bottom and that could be a very messy ordeal. But as long as we stay above the 22,750 repeat level, I think we start to lean in that direction. What I need to see is an impulsive, like a nice impulsive candlestick to the upside to start getting involved in the long direction in the 50 going forward. If we get that, then it might be a good sign going forward. Until then, I would anticipate a lot of choppy back and forth behavior in this market. This would make sense, but also be a somewhat positive sign, as turning points are typically noisy.

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EUR/GBP Forecast: Euro Continues to Stall Against the Pound

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  • The euro drifted a little bit lower during the trading session on Thursday as we continue to hang around the 0.8450 level.
  • The pound of course has given up some strength for a while, but I think a lot of this is just simple profit taking.

After all the market had been in a massive downtrend for what seemed like a lifetime and then dropped down toward the 0.8250 level to bounce that’s an area that’s been important as support all the way back to 2016 so the bounce is not a huge surprise. The question then becomes what happens next because we have to look at this through the prism of a market that is going to continue to see a lot of questions asked of both economies and with this, I would anticipate this overbought condition eventually breaks down, but I would not get short of the market until we break down below the 200 day EMA.

On a Potential Move Higher…

EUR/GBP Forecast Today 24/01: Euro Stalls (chart)

If we were to turn around and break above the 0.85 level, then the EUR/GBP market could go much higher, perhaps reaching the 0.86 level. The 0.85 level is an area that’s been important multiple times as well, so I think you need to pay close attention to it, but it is worth noting that just a few days ago, we ended up forming a shooting star, which of course is a sign of exhaustion. That exhaustion probably ends up being a nice cell signal if we do get a little bit more downward momentum. The overall trend, of course, is most certainly negative. I don’t wish to fight that. I think we are more likely than not to drop from here, as the euro itself is a bit of a basket case overall. Ultimately, I am still bearish, but don’t necessarily like either of these currencies.

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DAX Forecast: DAX Continues to Roar Higher

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  • The DAX rallied quite significantly during the trading session on Thursday and as we continue to stretch higher, we are now well above the 21,000 euro level and probably overbought at this point.
  • So again, I think this is a situation where you need to see a little bit of a pullback in order to find value, but this is a simple continuation of the overall longer term trend, the 21,000 euro level could be an area of support, but even if we break down below there, the 20,500 euro level offer support as well.

Ultimately, I don’t really see a scenario in which you should be shorting the DAX, especially considering that the ECB is likely to loosen rates going forward, and that should continue to be the case going forward.

Chasing and Shorting Aren’t a Thought Here

DAX Forecast Today 24/01: DAX Roars Higher (Chart)

I don’t have any interest in trying to get too cute here and I don’t want to chase the DAX. That’s the biggest thing because the market is one that you just have to be patient with if you’re not already involved in. That being said, if you are long of this market already, then it’s just a simple matter of trade management in what is a bit of a runaway move. The DAX should continue to profit from not only the ECB, and its loose monetary policy, but also the fact that it’s the first place that money goes to in Europe. So, people looking for safety but on the continent of Europe will go to Germany first. So, with that being said, I remain positive, and I just don’t see how this market turns around. Ultimately, this is a market that I think will continue to offer a lot of value if you are patient enough but you also have to be cautious not to get too caught up in the hype.

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USD/CAD Forex Signal: Can the Loonie Hold Against the US Pressures?

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Potential signal

  • I’d be a buyer of this pair above the 1.45 level, with a stop loss at the 1.4380 level.
  • I’d be aiming for the 1.4750 level.

USD/CAD Forex Signal Today 24/01: USD Pressures (Chart)

During the trading session on Thursday, we have seen the US dollar climb a bit against the Canadian dollar in early trading, as Canadian rates have dropped a bit, and of course we still have a complete mess in Ottawa. As long as that’s the case, I think it’s going to be difficult for the Canadian dollar to strengthen for any significant amount of time, especially against the greenback which of course is so strong.

Technical Analysis

The technical analysis for the USD/CAD pair is of course very bullish from the longer-term standpoint, but we are also at a major crossroads in the form of the 1.45 level. The 1.45 level is a large, round, psychologically significant figure, and an area where if we can break above there, then I think it would be a major turn of events, as it would unleash quite a bit of damage to the Canadian dollar.

On the other hand, if we do break down from here, I think there is plenty of support near the 50 Day EMA, with the 1.42 level underneath there being support. That’s an area that previously had been massive resistance, but at this point in time I think we’ve got a situation where the market is likely to continue to pay close attention to the 1.42 level as it is a major level. If we were to break down below there, then we could see a significant sell off, but right now we just don’t have anything out there that suggests the US dollar should suddenly collapse against the Canadian dollar.

That being said, if the Canadian government can actually get back to work, that might be helpful, but at the same time we have the specter of a 25% tariff against the Canadian by the Americans, which will undoubtedly be disastrous for the Canadian economy. The Canadian dollar would of course react in turn.

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GBP/USD Forecast: British Pound Continues to Stall

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  • The British pound has stalled a bit during the trading session on both Wednesday and Thursday, and as I look at the chart, the 1.2350 level is an area that I think a lot of people will be paying close attention to.
  • If we can break above there, then it could open up a deeper correction, which would not be a huge surprise, considering that the US dollar had been so strong for so long, that one would have to assume sooner, or later traders would be looking to take advantage of profits and close out positions.
  • However, look at this chart as one that will eventually offer value in the greenback, something that I want to take advantage of.

GBP/USD Forecast Today 24/01: GBP Continues to Stall (Chart)

US Economy

One of the biggest drivers of where we are going right now is the US economy, because quite frankly it is much stronger than most others around the world, including the United Kingdom. While the United Kingdom may not be as much trouble as others, the reality is that for some time now, anything not called “the US dollar” has struggled in the Forex world. There are a few outliers such as the Malaysian ringgit, but overall buying US dollars against other currencies has worked out quite nicely. This of course has been no different here, and the fact that money is flying into the United States at the moment it means that US dollars are heavily in demand.

While I do believe that a bounce from here could continue, the 1.25 level should end up being a major barrier. We also have the 50 Day EMA hanging around that area as well, so I think is worth noting that the technical traders will be watching that as well. Quite frankly though, I’m looking for the signs of weakness that will undoubtedly show up and stepping on the GBP/USD pair to the downside. I believe that we will revisit the bottom eventually, but the question just remains at this point as to how long it takes to get there.

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