The GBP/USD went into the weekend near the 1.27320 ratio, after starting the week around a mark of nearly 1.26900. Forex has caused plenty of headaches for day traders the past month with choppy results abounding in most of the major currency pairs teamed against the USD. Nervous sentiment has been growing in the U.S. and this has caused a USD-centric market to emerge in many cases.
However, the ability of the GBP/USD to fight its way back above the 1.27000 level will get a certain amount of traders likely whispering, “I told you so”. The notion that the GBP/USD had been oversold the past few weeks has become a view held by many. Unfortunately for bullish traders though – depending on your technical perspective – is that the GBP/USD still remains solidly within the lower depths of its one-month range, and is within middling territory when a three months chart when studied.
UK inflation Data was higher via CPI and Retail Sales were Weaker
While the U.S. economic situation has caused the USD to get stronger the past month due to bond downgrades and heightened risk-averse sentiment, then followed by a rush into U.S. Treasuries, U.K economic data didn’t make things easier for traders last week either. U.K Consumer Price Index readings came in stronger than expected on Wednesday, which certainly created the notion the Bank of England could remain aggressive regarding interest rate hikes. However, this was followed this past Friday with a rather strong decline in Retail Sales in the U.K., which created more short-term chaos in the GBP/USD.
Friday’s trading did see the GBP/USD go lower again and the 1.26890 ratio was challenged, but this low did not break beneath support levels from Wednesday and Tuesday if looking backward. Perhaps the ability to reverse off the low on Friday and go into the weekend with some upwards momentum will be looked at as a positive by some bullish traders trying to find signs of optimism. Economic data from the U.K. will be relatively light this week, but there will be Manufacturing PMI statistics released on Wednesday.
Forex Traders Remain Nervous and the GBP/USD is within this Fight
- Recent trading in the GBP/USD has been hard fought and choppy conditions have been strong, meaning speculators need to have their risk management maintained, and cautious positions should be pursued if wagers are put forth.
- While economic data this week will be relatively light, traders will hear talk from many global central bankers including the Bank of England, as the Jackson Hole meetings are held in the U.S. later this week.
- Nervous chatter is likely to rise in the coming days from financial institutions as they seek clarity, and the global central banking chiefs offer rhetoric on inflation and growth.
- The behavioral sentiment is likely to remain cautious this week as investors take a wait-and-see approach while trying to gauge their outlooks. The GBP/USD may still look oversold, but it remains difficult to predict sustained momentum higher.
GBP/USD Weekly Outlook:
The speculative price range for GBP/USD is 1.26610 to 1.27920
Last week’s trading in the GBP/USD tested a fairly wide range, but one that was largely predicted based on the fragile sentiment which exists in the global markets and Forex. Looking forward the 1.27000 will now become a focal point again and bullish traders will want to see this level hold. Tests upwards early this week could spark additional buying in the GBP/USD to test resistance levels that were hit the past week, namely the 1.27600 mark appears to be a likely target.
Day traders are advised to be careful with their use of leverage and not be overly ambitious if they are looking for large moves. Monday and Tuesday will offer a glimpse into short-term sentiment after a rather nervous week of results having been seen. The ability to incrementally move higher in the GBP/USD may look attractive and could prove worthwhile, but Forex has proved speculative at best the past month and traders need to be careful and perhaps target quick-hitting ratios because reversals may continue to flourish in the currency pair this week.
