Rather a choppy trading within the lower realms of its one-month price range persisted last week in the GBP/USD, and another week of nervous conditions may continue.
The GBP/USD went into the weekend near the 1.23390 ratio, after suffering a rather incremental decline in value last week. A high of 1.25460 approximately was touched on early Tuesday, but this flourish upward followed a stiff selloff in the hours ahead which may have served as a warning sign. Bullish speculators who have been dreaming about the 1.26000 targets being hit and sustained, apparently still need to focus on the GBP/USD being able to maintain values above 1.25000 for the moment and that may not be easy either.
GBP/USD Short-Term Outlook Hit by Nervous Sentiment Regarding Growth and Inflation
Both the Bank of England and the U.S. Federal Reserve are not making speculators of the GBP/USD comfortable. While inflation continues to crawl higher in the U.K. and U.S., growth outlooks remain troubling and to make matters worse financial institutions remain nervous about the U.S. central bank’s interest rate decision in the middle of June. The FOMC Meeting Minutes will be delivered from the U.S. Federal Reserve late this coming Wednesday, but a lack of clarity is likely to remain a feature of the trading landscape.
Having traded above the 1.26750 level on the 10th of May, the GBP/USD has seen many bullish speculators disappear from Forex in the past ten days. Short-term nervous outlooks are creating choppy conditions for the currency pair. The near-term will likely not get any easier as fragile behavioral sentiment reacts to a parade of inflation and economic growth reports this coming week, along with likely rhetoric from BoE Governor Bailey and potential comments from U.S Treasury Secretary Yellen in the middle of this week.
The incremental selloff of the GBP/USD has produced limited reversals higher the past handful of days, but downside pressure has been making support levels continue to appear vulnerable. On Thursday and Friday of last week the GBP/USD traded below the 1.23900 level momentarily, the last time the Forex pair had seen those depths was on the 25th of April.
Fed Interest Rate Policy and Concerns about Smaller Banks in the U.S are a Problem
- Chatter among financial institutions seems to believe the U.S Federal Reserve would increase interest rates again in June, but the U.S central bank is worried about the potential effect on mid and small-size U.S corporate banks and may pause because of these fears.
- Prelim GDP growth numbers will come from the U.S. this week, but it is the inflation numbers this coming Thursday and Friday which could stir Forex and the GBP/USD.
GBP/USD Weekly Outlook:
The speculative price range for GBP/USD is 1.23440 to 1.25450
The GBP/USD did not stray outside of its projected price range last week, but its incremental move lower will raise the speculative eyebrows of traders. However, before bullish GBP/USD steps into a position, they should keep in mind the risk events coming this week from the FOMC Meeting Minutes and economic data. Trading may be rather consolidated on Monday and Tuesday, with some volatility increasing on Wednesday as the Fed report is awaited.
Traders who are taking a longer perspective will note the GBP/USD remains within the higher elements of its three months chart. However the near term is likely to remain nervous and support near 1.24100 and 1.24000 should be watched, if the GBP/USD falls below this depth and struggles it could set the stage for another leg down. While selling pressure may continue to make speculators nervous, it also may attract the imagination of GBP/USD speculators who could perceive the currency pair is oversold below the 1.24000 to 1.23800 ratios.
The outlook for this week seems to be a repeat of last week, and it will be intriguing to see if support levels start to generate a reversal upwards that begins to incrementally challenge resistance levels. Yet traders certainly should not get overly ambitious in the coming days, and expect the GBP/USD to produce rather mixed results as clarity is sought and may be tough to produce.