GBP/USD Weekly Forecast - After Some Nervous Selling, Sudden Reversal Upwards

• The GBP/USD finished Friday’s trading at the 1.27000 level as the currency pair went into the weekend.
• On Wednesday of last week the GBP/USD was trading near the 1.25970 ratio.

Many bullish speculators during the rather turbulent selloff of the GBP/USD recently, may have lost their nerve and perhaps walked away from losing positions only to watch their trading screens start to demonstrate a reversal upwards. Last week’s trading was volatile in the GBP/USD, and essentially the past handful of week has been rather dramatic. This week may produce more of the same in the currency pair.

However, the finish of last week’s trading shows why trading perspective is always influenced by time frame perspectives. While the GBP/USD faced rather whipsaw results the past two weeks, finishing near the 1.27000 level going into this weekend puts the currency pair within a psychologically important technical and perhaps fundamental view. The GBP/USD is trading near the values it has traversed since the U.S Federal Reserve’s change of rhetoric on the 13th of December.  Folks with a mid-term view of the GBP/USD likely continue to imagine an upwards trend.

Past Month of Trading and Coming Week for the GBP/USD

Speculators who have been bullish regarding their outlooks for the GBP/USD have faced headwinds when the currency pair has climbed near the 1.27800 mark the past month. The GBP/USD did trade above the 1.28000 ratio briefly on the 28th of December. But these higher values have slipped from the grasp of bullish speculators swiftly, reversals downwards have proven painful.

Yet experienced speculators likely know that holiday season (cheack out our Holiday Season Trading Schedule article) Forex results are frequently problematic. Lighter than normal volumes during the Christmas and New Year’s season followed by the return of financial institutions in the first week of January often leads to volatility, and that has been demonstrated once again. The week ahead for the GBP/USD may prove to be rather troublesome for short-term speculators as they try to find a durable trend to take advantage of as they wager on direction.

Data Problems and Short-Term Volatility in the GBP/USD

However the ability of the GBP/USD to move higher on Friday and touch a key psychological level is an important bit of evidence that bullish perspectives still linger in financial institutions. Economic data from the U.K and U.S last week was rather troubling. Inflation in the U.K has remained stubborn and Retail Sales figures were quite weak, from the U.S Retail Sales figures have been strong and Consumer Sentiment has improved, yet Home Sales are still falling.

• Purchasing Manager Index readings will come from the U.K on Wednesday and the results are expected to be lackluster.
• If the GBP/USD can maintain the 1.27000 in trading early this week that could be a sign that the tide is starting to shift regarding steady bullish sentiment, but traders need to be conservative.
• Important GDP from the U.S could affect the GBP/USD on Thursday too.
• Next week both the Federal Reserve and Bank of England will be heard from regarding their monetary policy outlooks.

GBP/USD Weekly Outlook:

Speculative price range for GBP/USD is 1.26590 to 1.27670

This may prove to be a rather speculative week for the GBP/USD regarding current price realms. Data this week will provide impetus, but it is likely financial institutions are waiting for Central Bank insights which will only start being delivered about ten days from now. The 1.27000 will prove to be a solid gauge regarding risk sentiment this week. Day traders may want to stand on the sidelines early on Monday and watch the movement of the GBP/USD, but they should expect rather choppy results the entire week.

While global risk appetite continues to show signs of life in major equity indices, Forex remains rather turbulent as a bit more clarity regarding monetary policy is waited upon from the Federal Reserve and Bank of England. Higher than anticipated inflation numbers from the U.K this week likely caused some nervousness for financial institutions, particularly when the inflation numbers mixed with the rather poor consumer spending numbers from Britain. Quick hitting wagers this week which are not too ambitious may continue to be a rather solid tactical trading technique.