- The GBP/USD seemed to be happily trading around its week high on Friday near the 1.27690 ratio when the U.S jobs numbers were reported.
- The belief that January bearish trends had been defeated and the thought of better values in the GBP/USD starting to become a reality came to an abrupt halt.
- U.S Non-Farm Employment Change and Average Hourly Earnings came in much stronger than anticipated.
The price of GBP/USD suddenly sank like a lightning bolt to a low of nearly 1.26140 before slightly rebounding and going into the weekend around 1.26297. Day traders who had survived the price velocity lower in the GBP/USD may have sellers, and found very profitable trades suddenly being demonstrated in their accounts. Speculators who were long the GBP/USD and were not using proper risk management are likely looking at the currency pair and feeling rather beat up right now with a costly bet that has gone wrong.
Central Banks Insights Calm but Data Surprises Cause an Earthquake
The U.S Federal Reserve and Bank of England made their monetary policy statements this past week, there were very few surprises. The U.S Fed continued to say it will consider interest rate cuts when the time is correct later this spring. However, one key element the Chairman of the Federal Reserve did caution about was evidence a of tight labor market. This should have been a clue for Forex traders and folks wagering on the GBP/USD. The jobs numbers from the U.S published on Friday highlighted Jerome Powell’s comments which were made only two days prior.
The GBP/USD is now traversing support levels it tested in the first and middle weeks of January. The currency pair has essentially moved back into a position in which financial institutions seem to be leaning towards the belief the USD will get stronger in the mid-term, but remain cautious regarding the date of the ‘first’ interest rate cut from the U.S Federal Reserve. After the U.S jobs data was published on Friday, speculative hope for a March ‘cut’ has definitely lost betting appeal.
The 1.26000 Level as Important Support in the GBP/USD
The 1.26000 level continues to act like important psychological support for the GBP/USD. The currency pair moved above this mark in the middle of December and has sustained this key support ratio. This week’s trading may continue to showcase behavioral sentiment in the GBP/USD uses this ratio as an inflection point.
- A sustained move below the 1.26100 level would cause alarms among GBP/USD traders.
- Early trading on Monday should be watched to see if the 1.26100 and 1.26200 levels continue to act as place where reversals upward are initiated technically.
- A move below the 1.26100 that is sustained could cause another flurry of wagers looking for some movement lower, but the price will certainly be seen as speculative by many.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.25810 to 1.27250
The GBP/USD had a rather volatile month in January, particularly for speculators who were betting on a sustained reversal higher and a re-challenge of December highs. This past Friday’s price action was a violent reminder the GBP/USD can produce swift momentum that is dangerous when risk management tools are not used. Behavioral sentiment starting this week is likely going to be rather nervous and traders wagering on positions should not get overly ambitious.
Speculators who believe the GBP/USD was oversold on Friday are likely to be proven correct, but predicting the timetable of a reversal higher that is sustained remains a bet. The GBP/USD will have to prove it has sustained value above the 1.26300 level early on Monday and continue to show this going into Tuesday for more buying sentiment to potentially build. This coming week’s trading results will focus on central bank sentiment and outlooks by financial institutions that likely remain cautious.
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