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GBP/USD Weekly Forecast: Speculative Perspective Important This Coming Week

Another week of rather volatile conditions persisted for GBP/USD speculators last week, this as the Bank of England and growth data from the U.K created impetus.

GBP/USD Weekly Forecast - 12/05: Speculation Crucial (Chart)

  • The GBP/USD went into this weekend near the 1.25210 ratio.
  • This result may look like a negative technical sentiment when a one week perspective is used, but the ability of the GBP/USD to climb back from lows around the 1.24460 ratio seen on Thursday may spur speculators with a buying interest.
  • While the GBP/USD did finish the week lower than it started with regarding value, speculators likely are intrigued about the notion of additional upside potential.

But before speculators gamble blindly on upside, they should also remember the rather choppy Forex landscape which has proven difficult for GBP/USD day traders and all other wagering on major currencies versus the USD since the start of this year. Last Thursday’s Bank of England Monetary Policy Summary helped pushed the GBP/USD lower until financial institutions apparently thought it had been oversold.

Lower Depths and a Climb Upwards in the GBP/USD

Last Thursday’s lows challenged values seen on the 24th of April, downwards momentum has been strong in the GBP/USD. A one month chart of the GBP/USD still shows the currency pair struggling to maintain its balance above the 1.25000 mark. Yes, the 1.26000 target may be the preferred value for bullish GBP/USD to target, but the simple ability of staying above the 1.25000 level the past month has not been easy. However, early last week did see the GBP/USD remain above the 1.25000 mark until Wednesday.

It is likely financial institutions were positioning for inaction from the Bank of England which certainly was delivered on Thursday. The BoE spoke about the need to potentially have to lower its Official Bank Rate in the coming months. This is something the BoE likely doesn’t want to do before the Federal Reserve lowers their Federal Funds Rate. Inflation concerns for now have allowed the Bank of England to stay inactive. Financial institutions are suspicious about global central banks and this has led to widespread volatility across Forex. Yet, last Friday also saw a push higher in the GBP/USD and this occurred when GDP numbers from the U.K came in stronger than expected.

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    Rush Higher and Confusion Regarding Where to Go Next

    While the growth numbers from the U.K came in with a gain that was not anticipated and helped the GBP/USD surge to a high of around 1.25400 momentarily, the currency pair was not able to hold onto high water marks which were still below values seen last Monday and Tuesday. The GBP/USD went into this weekend producing a slight selloff.

    • The slight late selling in the GBP/USD last Friday occurred after an inflation report from the U.S, once again came in stronger than expected. And this is an important warning sign.
    • The broad Forex market remains nervous regarding U.S data outlooks, and while they might be leaning towards a weaker USD outlook mid-term, short-term conditions remain volatile and day traders need to remain cautious because of incoming data this week.

    GBP/USD Weekly Outlook:

    Speculative price range for GBP/USD is 1.24625 to 1.26150

    The U.K will be rather light on economic data this week. However the U.S will present important Producer Price Index statistics on Tuesday and CPI numbers will be delivered on Wednesday. GBP/USD traders need to be prepared for more price velocity. Monday’s opening should be watched intently to judge existing behavioral sentiment when the London Forex session opens fully. If the GBP/USD can maintain its marks above the 1.25200 level this may be seen as a sign of optimism, but any falls below the 1.25200 and challenge of the 1.25175 mark will highlight nervousness remains ample.

    Traders should watch technical charts carefully on Monday and Tuesday and make sure they are not overly leveraged as inflation data starts to come from the U.S on Tuesday. Weaker inflation data from the U.S would help GBP/USD bullish perspectives certainly, but betting on the outcome of the PPI and CPI readings beforehand will be gambling, particularly taking into consideration the surprising outcomes which have been coming from the U.S on a consistent basis the past few months. If the inflation numbers are weaker from the U.S this could spark a surge of GBP/USD buying.

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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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