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The GBP/USD reached a high for last week on Monday when a value of 1.28720 was challenged, but resistance proved stiff at this height, and then on Tuesday the currency pair began to incrementally show signs of weakness. A low around the 1.27410 mark was seen on Tuesday, which was followed by a reversal upwards late in the day which touched the 1.28050 vicinity. However, trading became more nervous on Wednesday, and Tuesday’s high was never seriously challenged again.
A low of almost 1.26795 was seen on Wednesday as the 1.28000 ratio started to look like a distant target. On Thursday the Bank of England delivered its anticipated rate hike of 0.25% and spoke in rather cautious tones regarding the U.K. economy and worries about inflation. However, like the Fed and ECB in the week prior, the BoE didn’t deliver a definitive outlook. A low of almost 1.26200 was challenged momentarily on Thursday as day traders likely became fatigued from the volatility ripping through the GBP/USD.
Financial Institutions seem to be Hoping Their Outlooks are Correct
Friday’s jobs numbers from the U.S. brought more chaos to the broad Forex market as the Non-Farm Employment Change numbers came in weaker than expected, but inflation data via the Average Hourly Earnings produced a slight rise. The GBP/USD which was trading a touch below the 1.27000 level immediately jumped higher after the U.S jobs numbers report. A high of nearly 1.28940 was produced on Friday before the GBP/USD started to diminish in value as the weekend approached.
The GBP/USD will start tomorrow’s trading near the 1.27370 ratio and speculators should be braced for more volatility in the days ahead. On the 13th and 14th of July the GBP/USD was trading above the 1.31400 mark and bullish traders were likely feeling strong. However, since reaching those highs the GBP/USD has experienced volatile downward trading results. Traders who believe the GBP/USD has been oversold may be proven right, but the question is when sustained upwards momentum can develop.
Important Data from U.S and U.K will affect the GBP/USD Late this Week
- On Thursday of this coming week, the U.S. will publish Consumer Price Index statistics, these inflation readings will be important and certainly create volatility in the GBP/USD.
- Because energy prices have risen slightly in the U.S. over the last month due to higher Crude Oil prices, a slight rise in the CPI would not be unexpected. A stronger U.S. inflation number than anticipated could spook Forex and cause a weaker GBP/USD.
- The U.K. will release its GDP numbers on Friday and traders will want to see if recessionary pressures remain problematic. Rather lackluster growth data is expected from the U.K.
GBP/USD Weekly Outlook:
The speculative price range for GBP/USD is 1.25910 to 1.28220
The price range of the GBP/USD has likely proven disappointing for bullish traders of the currency pair in the past few weeks. The ability of the GBP/USD to make support levels vulnerable should not be discounted. Traders who believe a sudden higher turnaround is going to be produced and sustained may be too ambitious. The price band of the GBP/USD has been difficult.
Traders who are anticipating more downside price action should not be overly ambitious either. The greatest chance for price velocity to develop this week will likely be this Thursday. Until then behavioral sentiment may rule the GBP/USD and the broad markets have taken on a rather cautious tone.
Speculators who want to gamble on support levels suddenly becoming strong should be careful. The past three weeks have produced a solid trend downwards, but the 1.26000 level for the moment looks like a solid support ratio, but traders should certainly monitor the 1.27000 mark early this week and see if it can be sustained. If this value shows some discipline, speculators may believe a wave of buying can be produced in the GBP/USD, however, inflation numbers from the U.S. on Thursday will provide an ignition switch for volatility depending on the outcome.
