The GBP/USD begun last week by hitting a five month low, but then started to battle its ways upwards and went into this weekend having produced rather polite climb.
- The GBP/USD will begin trading this week near the 1.24880 ratio, which is an accomplishment considering the currency pair touched a low around 1.22970 on Monday the 22nd of April.
- The downwards selling in the GBP/USD continued early last Monday, but then a reversal upwards started to be seen.
- Even as the U.S continued to produce rather mixed economic data the entirety of last week, the GBP/USD produced a rather incremental move higher.
The lows last week had last been seen on the 14th of November, which may appear significant technically because that day produced a strong amount of upwards buying. The low which was tested early last week did produce buying too, and intriguingly Tuesday’s run higher did have some price velocity which was demonstrated. Technical traders may believe the 1.23000 ratio has essentially proven to be a level in which financial institutions believe the GBP /USD has been too oversold.
Difficult Days Ahead for Central Banks and the GBP/USD
This coming Wednesday the U.S Federal Reserve will make its FOMC Statement. No change to the Federal Funds Rate will happen this week. U.S economic data remains troubling because inflation continues to remain stubborn, but GDP growth numbers last week did show a significant drop which is intriguing. Equally interesting for GBP/USD traders is that fact the Bank of England will hold its monetary policy meetings next week.
While the BoE is not expected to make any change to its Official Bank Rate on the 9th of May, there are signs the U.K economy is continuing to struggle. Manufacturing numbers this past week were poor and the CBI Realized Sales produced a terrible reading last Thursday of minus -44. The GBP/USD reacted to the bad retail number from the U.K with a fall to the 1.24565 vicinity but recovered its footing. The notion that the Federal Reserve and Bank of England are both in difficult positions regarding policy is becoming a common theme. Yet both central banks appear ready to remain reactive and not become proactive, particularly as inflation remains within the economic landscape.
Jobs Numbers and Additional Factors as Speculators Consider Equilibrium
The trading above the 1.25000 level created last Thursday and Friday was noteworthy, but the GBP/USD remains volatile and day traders hoping to catch a trend should be careful. The past three months of trading in the currency pair have been problematic and the GBP/USD remains within the lower depths of its mid-term technical price range because outlook regarding central banks is troublesome.
- Adding more fireworks to the GBP/USD trading late this coming week will be U.S jobs numbers on Friday.
- If U.S hiring shows signs of slowing it could help spur on some USD centric weakness in Forex, meaning the GBP/USD could target higher ratios.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.24390 to 1.25410
While the GBP/USD remains within sight of the 1.25000 mark, it is still nevertheless also near lower values. If the 1.24900 level remains durable as resistance this may mean some selling could develop in the GBP/USD in the near-term. However, because of the U.S Federal Reserve FOMC Statement this coming Wednesday trading in the GBP/USD is likely to remain rather choppy leading up to this event. The potential that financial institutions believe equilibrium has been found for the currency pair may lead to a rather broad test of the current price range between the 1.24500 and 1.25300 marks.
Forex trading has not been easy the past few months and speculators do not have many reasons to believe this coming week will suddenly make things easy. Caution should be practiced as the GBP/USD likely continues to test a rather choppy range. Support levels if tested may prove to be an interesting place to ignite quick hitting buying positions looking for momentary upwards movement. Support around the 1.24800 to 1.24700 levels may prove interesting in the near-term, but risk management will certainly have to be used to guard against stronger than anticipated moves.
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