Will they or won’t they? This is the question the investment world waits from Great Britain. A political tightrope is still being walked by the British government and it is creating definite combustibility within the GBP as shadows continue to be cast by the implications of the Brexit via the way forward when dealing with the European Union and others regarding trading and political treaties. As the United Kingdom threatened to act unilaterally, the British Pound has seen some of its value evaporate during the month of September.
On September the 1st the GBP/USD was trading near highs it hasn’t really tested with gusto since June of 2018. However, after hitting a high of nearly 1.34800 to start the month, the GBP/USD started to experience a sharp reversal downwards. And as the month of October approaches the British Pound is testing support levels last experienced in late July against the US Dollar.
A combination of mixed global risk appetite and concerns regarding the political wrangling in the United Kingdom has made an influence on the downward trajectory of the USD/GBP. Speculators now should be asking themselves if the selloff has been too strong and if the forex pair will reignite a bullish trend higher? Technically the GBP/USD does appear oversold. However as a point of reference, from late June until the fourth week of July, the GBP/USD was trading in a range of approximately 1.22500 to 1.27400 until bullish momentum emerged and began to create better value for the British Pound.
The surge higher for the USD/GBP from late July continued until the 1st of September and the price action within the forex pair during this time period was rather swift. The reversal lower in the GBP/USD since the 1st of September has also been quick and has likely left some speculators scratching their heads. Traders who were not using stop losses on the 10th of September may have experienced a shock if the forex pair went against their buying positions when a sharp decline took place.
The GBP/USD is a major forex pair; it enjoys a vast amount of volume and transparency. However, the onslaught of the Brexit implications the past four years have caused an abundance of volatility which sometimes makes the forex pair feel like an emerging market currency pair. However, this characteristic also makes the GBP/USD very attractive as a speculative asset. The forex pair still has a strong ability to trend with momentum and then show a capability to reverse off of strong support and critical resistance.
The GBP/USD could be oversold within its current price range. Prices within the 1.27500 to 1.26700 level look like attractive areas to attempt buying positions of the GBP/USD. Yes, risk management should be used to protect against the possibility the forex pair will traverse even lower, but the results from the past month appear to have produced bearish momentum which may have been overdone. Importantly, the US election may have a profound impact on the GBP/USD because of the positive relationship between the current White House administration and UK Prime Minister Boris Johnson.
If global risk appetite can muster some strength in the coming weeks and political battles lessen in the UK, the GBP/USD may see positive benefits. If trading conditions grow more negative on equity indices and political shadows continue to display storms, the GBP/USD could challenge support levels lower. Trading the GBP/USD has a lot to do with perspective, and patience is needed when trading the forex pair to take advantage of its trends which can become strong.
GBP/USD Outlook for October:
GBP/USD Speculative price range October: 1.25100 to 1.33000
Support at 1.26600 the level looks adequate, but if cracked lower the 1.25100 mark could be targeted.
Resistance at 1.29100 may prove strong, but if broken higher the 1.325000 mark could become a focus.
