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GBP/USD Weekly Forecast: Mixed Data and a Wickedly Fast Dangerous Range

Forex traders participating in the GBP/USD the past week likely had their emotional fortitude tested as dynamic price velocity created havoc with swift choppy reversals.

  • The GBP/USD was trading near the 1.26840 price level on Tuesday when the publication of U.S Consumer Price Index data hit.
  • Before the U.S numbers were released it should be noted the GBP/USD was trading at a high not seen since the 2nd of February.
  • However, upon the higher U.S inflation numbers via the CPI, the GBP/USD abruptly moved lower.

GBP/USD Weekly Forecast - 18/02: Data-Driven Volatility

A mark of nearly 1.25900 was being tested within the blink of an eye for day traders who may have been rewarded handsomely if they had selling positions working before the U.S report, or were punched in the gut if they held long positions during the rapid fire move lower.

The U.K also released rather intriguing data last week which has caused further problems regarding the outlook for the GBP/USD. While the GBP/USD went into this weekend near the 1.25990 ratio (which might be seen as a positive accomplishment taking into consideration the economic reports which were seen the past handful of days), traders looking forward to this week of price action need to consider the dangerous landscape ahead. Inflation remains stubborn in the U.K and the Gross Domestic Product statistics from Britain continue to demonstrate recessionary tendencies.

The 1.26000 Ratio and the GBP/USD

The 1.26000 ratio for the GBP/USD remains a dynamic magnate for financial institutions. Amidst the whipsaw trading displayed last week, somehow the currency pair was able to climb from a low which went below the 1.25400 level on Wednesday and tested this vicinity again on Thursday. The GBP/USD also managed to climb back after additionally surprising inflation gains in the U.S PPI report on Friday.

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    The U.S will be on holiday tomorrow which means Forex, including the GBP/USD, will see rather light trading volume. However it may be a good time for GBP/USD to take a deep breath and consider what they have seen the past month and a half of trading. The GBP/USD was trading near a high around the 1.28275 level on the 28th of December, and it found choppy conditions in January and rather durable resistance near the 1.27000 ratio until early February.

    Downward Slope and Thoughts about GBP/USD Support

    There are likely a number of traders and financial institutions which have rather interesting bullish perspectives on the GBP/USD for a variety of reasons. First and foremost, they may simply believe the GBP has been oversold. And then there are the considerations that the central banks are in a difficult spot and all battling the same problems of mixed economic data. But the next couple of months may remain choppy in the broad Forex markets.

    • The short-term has proven extremely difficult to wager on economic data reports. Trading the ‘numbers’ before the release of U.S and U.K data reports has proven dangerous.
    • Support has proven durable since mid-December near the 1.25400 mark, it has been challenged a handful of times by rapid moves lower when bullish traders have run out of power.
    • Traders who have been selling the GBP/USD via technical resistance, now have to decide where the next resistance level may produce another reversal lower.

    GBP/USD Weekly Outlook:

    Speculative price range for GBP/USD is 1.25395 to 1.26560

    Choppy conditions have been dominant in Forex, including the GBP/USD and this may continue this week. There is relatively light economic data on the schedule this coming week, except for Purchasing Managers Index readings. Behavioral sentiment will rule the GBP/USD in the coming days as financial institutions try to decide where equilibrium should be as they consider the hurdles the Bank of England and Federal Reserve will have to jump in the months ahead.

    Murky outlooks among the big traders may cause additional volatility this week in the GBP/USD. The 1.26000 could serve as a rather intriguing vantage point in the days ahead. Moves above it can be understood while looking at technical charts, but moves below also carry credible perspectives. Risk management will be essential this week in the GBP/USD.

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    Robert Petrucci
    About Robert Petrucci
    Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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