The GBP/USD turned in a solid week of gains last week. After falling to a low on Monday of last week, but not going below lows seen on the previous Friday the currency pair began to incrementally climb higher.
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The GBP/USD closed near the 1.24790 mark before going into this weekend. Having survived an intriguing set of circumstances last week with gains, this coming week will prove to be another interesting spectacle for Forex speculators.
Last week began with the absence of U.S financial institutions, but did see President Trump resume power in the U.S White House. Poor behavioral sentiment which powered the GBP/USD lower since early December, may have run into the opinion the currency pair had finally reached oversold territory on the 13th of January when the 1.21000 was momentarily punctured lower. The rise higher in the GBP/USD since then has not been steady, but gains have certainly been produced, this past Friday’s price action was intriguing.
Resistance Proved Vulnerable near 1.24000
On Friday the GBP/USD raced through the 1.24000 level and showed the ability to sustain its higher stance. In fact, the 1.25000 level was seen for a moment, but a slight reversal lower going into the weekend produced some selling. Price velocity in the GBP/USD has been in evidence and day traders are reminded to use solid risk management in the currency pair as a safeguard. While the GBP/USD is a tier one currency pair, questions surrounding central bank policy has caused volatility.
Global central bank rhetoric and actions will be on display this coming week and will affect the GBP/USD. The Fed and ECB will step up to their respective podiums in the coming days. The Fed is expected to stand in place this coming Wednesday. The European Central Bank is expected to cut its Main Refinancing Rate by another 0.25. However, if this plays out as anticipated, the driving force in Forex this coming week may be from President Trump who has begun to share his opinion on interest rates. He is in favor of the U.S Fed cutting rates, which puts him in opposition to the Fed’s current stance, and this could cause a potential storm near-term.
U.K Economic Data and the Bank of England
While the U.K remains mired in lackluster economic data, this coming week will only offer housing statistics for GBP/USD traders to consider. However, BoE Governor Bailey is scheduled to testify in front of the Treasury Select Committee on Wednesday in London. The GBP/USD will react to his shared viewpoints.
- Traders will be bracing for news from the Fed and ECB which they know is in the cards too at that juncture.
- The GBP/USD which has seemingly been oversold on weak behavioral sentiment caused by the Bank of England’s over cautious position in December still has some important psychological hurdles to jump.
- The Bank of England will announce their Official Bank Rate on the 6th of February and though the BoE is expected to cut its interest rate, financial institutions will want some clues from Governor Bailey when he speaks this coming Wednesday.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.24050 to 1.25800
The weakness in the GBP/USD which has been on full display since the second week of December remains under a cloud. Yes, the upwards momentum generated last week showed sentiment believes the currency pair had been oversold. The question now is where behavioral sentiment will lead this coming week and the next. The global central banks are in an awkward position. The BoE is expected to cut interest rates, while the Fed is expected to remain stuck in place. Outlooks are vital.
Traders need to be cautious. While the GBP/USD from a historical perspective looks to be oversold and the 1.25000 and 1.26000 ratios may look enticing, these prices may prove to be hard fought near-term. Financial institutions have largely positioned for the Fed and ECB this coming week, and the BoE in early February. The question is if their outlooks will prove right. Until then day traders should expect nervous conditions to persist in the coming days. Looking for upside may be appealing in the GBP/USD but it should be done with a full arsenal of strict ordering including stop losses and take profit usage.
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