The GBP/USD will begin trading this week near the 1.24125 mark. Traders who were on long vacations and were not paying too much attention to the GBP/USD during their Easter holidays may look at the value and assume the currency pair had a calm quiet week. However, this was not the case and the GBP/USD produced violent trading as its range provided speculators with a wide price disparity.
U.S. data was Weaker than Expected but Friday the USD became Stronger as the Day Progressed
Having started last week essentially where the GBP/USD finished allows speculators once again to test their perceptions. The GBP/USD did reach a high of nearly 1.25485 on Friday before it sank like a stone. The low that the GBP/USD closed at going into the weekend was near Wednesday’s and Monday’s depths. So what happened? U.S inflation data came in weaker than expected and this gave the GBP/USD a seeming boost upwards. On Friday the Retail Sales numbers also came in weaker than expected. So what went wrong?
The results from Wednesday and Thursday’s inflation statistics from the U.S., and Friday’s Retail numbers may have been believed to help solidify the climb by the GBP/USD. However, Consumer Sentiment numbers from the U.S. came in stronger than expected also on Friday. And then chatter could be heard among analysts who commented about the high price of Crude Oil once again, which in their minds may be a reason inflation will remain stubborn in the mid-term. Add to this volatile mixture comments which came from various U.S Federal Reserve officials that inflation remains problematic and additional interest rate hikes may be needed also at the end of last week, and suddenly there was enough fuel to ignite USD strength, meaning a selloff of the GBP/USD occurred.
U.S Federal Reserve Interest Rate Hike almost certain in Early May
- The U.S. Fed is almost guaranteed to increase the Federal Funds Rate by another 0.25% in early May, but folks this was already known by most traders.
- It is the realization the Fed may stay aggressive with another hike in June which likely has caused some sudden strength in the USD to happen again.
- Inflation data did show signs of weakening via U.S. reporting, but concern about high energy prices continues to cause worries.
Traders of the GBP/USD may have to get used to the current price range and use their technical perceptions to pursue wagering. While it appears clear many financial houses believe the GBP/USD has reason to be higher, this is because of challenges above the 1.25000 level in the past two weeks. It is also apparent there are enough shadows lurking which are causing uneasy behavioral sentiment still and selloffs. Economic data will be important this coming week, but it is likely financial institutions will be trying to get a clear picture regarding their outlooks. This may make things difficult for day traders this coming week if they are not careful.
GBP/USD Weekly Outlook:
The speculative price range for GBP/USD is 1.23240 to 1.25910
Having finished the week near its lows, the GBP/USD opening on Monday will be intriguing. Speculators should monitor early trading to try and get a handle on where behavioral sentiment is leaning. Having shown the ability to produce a rather wicked reversal before going into the weekend, if selling pressure persists early this week, the GBP/USD may find support levels being challenged and vulnerable. A sustained fall below the 1.24000 mark could be a short-term bearish signal and may mean further downside pressure is going to be seen. Yet, it is important to note that support levels near 1.23500 may be considered a solid place to look for reversals higher by some financial institutions.
Day traders who were pursuing long GBP/USD positions on Friday and got burned by the sudden rush lower were certainly reminded that stop-loss protection is vital when betting. The current price range of the GBP/USD between 1.24000 and 1.25000 may prove to be a rather solid betting range this week as financial houses look for equilibrium. Pursuit of the GBP/USD should be done with careful consideration of technical charts while keeping an ear on the potential of developing news to stir the broad market.
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