A historic low was hit by the GBP/USD early last week, as financial institutions reacted with nervousness to the new U.K government fiscal policy.
After touching historic lows on Monday of last week, as investment houses reacted in fear to the new economic mandates heralded by the Liz Truss led U.K government, something not so surprising happened. A recovery of value was ignited higher and the GBP/USD currency pair actually finished the week with sincere upwards momentum.
After touching a low of nearly 1.03650 on early Monday the 26th of September, the GBP/USD went into the weekend with a value of about 1.11555. The result higher was not a bad result and for brave bullish traders who wagered on a reversal higher, they were likely rewarded. Now the question is where the GBP/USD will go next with so many stormy economic clouds still blocking out clarity on both sides of the Atlantic.
The U.K Tory led Government was widely criticized for its new Policy
Traders who are wondering about technical perspectives and are also worried about fundamental considerations are taking a logical approach to the complex speculative puzzle that lies ahead. The U.S Federal Reserve will likely raise its interest rate again in November and this action will certainly get a response from the Bank of England. However, the policy which is being undertaken by the U.K government is divergent from U.S policy.
- If inflation data actually does start to subside sooner – in the next three to four months - rather than later the U.K bet on lowering taxes and trying to ignite more growth could be proven correct.
- After historic lows were made by the GBP/USD early last week, support has to be considered carefully. A repeat of the history making depths may not reappear in the near term.
Fears of a Repeat Downward Performance this Week in the GBP/USD may not occur
Support for the GBP/USD may actually prove rather durable at a higher level than last week’s deep lows. The potential exist that financial houses and speculators will view the 1.08500 ratio as a depth that is oversold. After the rather quick turnaround upwards generated by buying of the GBP/USD last week, some traders may expect higher values to be demonstrated. This is where things become tricky, just because the GBP/USD may have been oversold, it doesn’t mean it is time for an all-encompassing return to the a trading range of 1.23000 to 1.39000 by the Forex pair.
Speculators are advised to prepare for rather choppy conditions in the GBP/USD this coming week. Global market conditions remain fragile and equity indices are definitely displaying signs of distress, if current support levels do not hold in the major indices some institutions could seek the USD as a potential safe haven.
However, if the GBP/USD were to stumble to lows around the 1.09000 level this may create speculative buyers who believe a level of 1.10000 ‘should’ be thought of as a rather strong psychological mark. There are likely more nervous days of trading ahead and speculative wagers on the GBP/USD needed to be treated with care.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.08345 to 1.13100
Support levels of the GBP/USD should be monitored closely and the 1.10000 level may serve as a magnet. Bearish traders may be allured by the belief nervous conditions will cause more downward price action and a test of this mark. However, bullish traders may want to see some slight erosion from the current higher ‘new’ weekly range of the GBP/USD and use downward momentum as a potential launching ground for the currency pair.
It seems likely the GBP/USD may find that is has a new price range in which its value needs to find equilibrium as economic clarity in the U.S and U.K remain difficult to navigate. A range between the 1.08500 and 1.13100 levels may be the numbers in which the GBP/USD resides in the near term. Economic data will certainly affect behavioral sentiment, but financial institutions may be used to the ‘noise’ surrounding the GBP/USD and find a solid week of technical trading perspectives can serve well in the coming days.