The GBP/USD went into the weekend near the 1.21650 mark, which is a lower value than the previous week’s finish. However, on Friday the GBP/USD did climb to the 1.23200 vicinities before running into headwinds. To open last week’s trading the GBP/USD hit the 1.23445 ratio on Monday the 5th of December.
Some bullish speculators may be asking what went wrong with the trend in the GBP/USD. However, that is likely the wrong question, the technical range of the currency pair was actually quite firm and after hitting a low slightly below the 1.21100 mark the GBP/USD recovered quite well, showing it has the ability to maintain it higher mid-term price realms when looking at a three-month chart.
A Strong GBP/USD Climb on Friday was hit by U.S Inflation Data Worries
After moving upwards on Friday and coming within sight of highs produced early last week, the GBP/USD suddenly saw a reversal lower. Technically the move down can be interpreted as a reaction to the belief the GBP/USD had been overbought and the 1.23000 realm remains difficult to sustain values above. Another perspective to can be considered too by traders, this is because Producer Price Index data from the U.S came in slightly higher than expected and this likely caused some selling in the GBP/USD.
- This coming Tuesday the U.S will release more inflation data via the Consumer Price Index statistics.
- On Wednesday the U.S Federal Reserve is expected to raise the Federal Funds Rate by another 0.50% to 4.50%.
- This coming Thursday the Bank of England will release its Official Bank Rate and is expected to raise borrowing costs by 0.50%, to the 3.50% level.
The GBP/USD will see a Full and Volatile Week of Trading as Financial Houses React
With plenty of central bank activity on the calendar this coming week, speculators should be cautious about pursuing the GBP/USD. The rather calm price range of the GBP/USD may continue to be demonstrated, but there are bound to be moments of fast trading as financial houses react and position their cash holdings. The surge higher in the GBP/USD the past two and a half months have been solid; traders now would like to see the U.S. Federal Reserve and Bank of England offer no surprises.
Inflation remains a global concern, but some analysts believe there are signals that prices are starting to moderate. If the U.S. Fed and Bank of England show they are in agreement with this and give more dovish outlooks at the end of this coming week regarding future interest rates, this could help the GBP/USD sustain its values and perhaps incrementally increase over the mid-term.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.21050 to 1.23950
The GBP/USD has shown an ability to raise its support levels on a weekly basis since the beginning of October with a rather solid display. However the price action of the GBP/USD upwards momentum has been fast and last week’s results may have been a sign a pause was needed. Consolidation should be watched. Because of the U.S and U.K central bank mandates and pronouncements coming this coming Wednesday and Thursday traders should be cautious. If the GBP/USD falls below the 1.22000 level a legitimate test of the 1.21800 could develop, but rather solid-looking technical support seems to exist near the 1.21400 mark.
Bullish speculators who want to aim for higher ground and are day traders may be tested harshly in the coming days. Traders may want to be buyers when slight reversals lower have taken place and then ignite buying positions. Although the GBP/USD has the earmarks of a currency pair that may trade higher, financial houses may remain nervous and produce choppy Forex conditions the first couple of days this week.
If all central bank outlooks are confirmed later this week, the GBP/USD may be able to break above the 1.23000 level and sustain this ratio. Traders need to use full risk management, they should also note that trading volumes are likely to be large – this as financial institutions start to maneuver their positions before financial markets start to slow because of the holiday season quickly approaching.
