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GBP/USD Weekly Forecast: Dive Lower, Economic Data and U.S Federal Reserve

The GBP/USD was trading rather comfortably near highs on Friday around the 1.28075 level, when U.S jobs numbers created a rupture in Forex and sent the currency pair lower.

GBP/USD Weekly Forecast - 09/06: Data Dives GBP/USD (Chart)

  • Reactionary trading hit the GBP/USD on Friday when the Non-Farm Employment Change numbers came in stronger than anticipated.
  • The higher outcome via U.S economic data sent the GBP/USD from values which were challenging highs into an immediate reversal.
  • The 1.28000 level which was being comfortably traded within sight of from Tuesday until that moment on Friday, suddenly vanished and the move lower sent the GBP/USD into the weekend near a value of 1.27150.

Financial institutions and speculators of the GBP/USD and the broad Forex market have a difficult week ahead. The U.S will release CPI numbers on early Wednesday and then five and a half hours later the U.S Federal Reserve’s FOMC Statement will be published. U.S inflation numbers via the Consumer Price Index data will create a reaction, and then the Fed’s monetary policy statement will be the climax for the Forex show.

GBP/USD Sudden Lows and Consideration

Having proven there was plenty of bullish sentiment in the GBP/USD most of the past week, the currency pair did see a magnate like performance around the 1.28000 level for a handful of days. Yet, the headline numbers from the U.S jobs report caused a massive amount of nervousness. The dive lower in the GBP/USD was not a surprise based on the result of the headline number from the Non-Farm Employment Change, but a look deeper shows the employment picture isn’t very robust in the States and needs to be questioned – but this did not help the GBP/USD climb, at least not until now.

Behavioral sentiment was in control and traders who were long the GBP/USD before the U.S jobs numbers likely got slaughtered with costly trades if they were not using risk management wisely. Tomorrow’s early price action will be significant, and determine if this weekend and the ability to investigate the U.S jobs data more will create a more equal approach. Interestingly the GBP/USD went into the weekend above the lows the currency pair saw last Monday when the 1.26965 ratio was seen briefly.

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    Inflation and Fed Sentiment will Generate Plenty of Power

    The GBP/USD needs to be watched closely upon opening tomorrow to see if there is a reversal after Friday’s sharp selloff. If no reversal takes place this may indicate the GBP/USD will remain within the lower edges of its price range with some testing being seen until the U.S inflation data is published on Wednesday. However, even though the CPI result is vitally important, it will only be a precursor for what could happen when the Federal Reserve takes the stage.

    • Financial institutions have been counting on hearing a more dovish Federal Reserve this coming Wednesday for the past month. If the Fed sounds overly cautious this could propel the GBP/USD lower.
    • Traders face a complex set of issues in the coming days via U.S centric metrics, but there is also the U.K election which is now approaching in early July which will make financial houses nervous too.

    GBP/USD Weekly Outlook:

    Speculative price range for GBP/USD is 1.25810 to 1.28520

    The GBP/USD could prove to be very dangerous this week and day traders without a lot of experience will need to be careful. The complexity of data and central bank considerations which will collide may cause whipsaw reactions in the GBP/USD with volatile price velocity. Traders will need a serious amount of risk management in the coming days. Some traders may want to sit on the sidelines and simply watch the show that develops in the GBP/USD.

    For those wanting to wager, perspective and a real grasp of technical and fundamentals will be important. If U.S inflation figures come in stronger than expected this could send the GBP/USD lower and a test of values from mid-May until the first week of June could be seen. The Fed is not going to cut interest rates on Wednesday, but if they sound somewhat dovish and say they see evidence which suggests an interest rate cut could happen in late summer this might be enough to propel the GBP/USD stronger. Traders wanting to make wagers before the U.S CPI numbers and before the Fed speaks this coming Wednesday, and who have the desire to keep their positions open, need to understand they are betting in what could be a casino like environment. 

    Ready to trade our GBP/USD weekly forecast? Here are the best forex trading platforms UK to choose from. 

    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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