The GBP/USD went into this weekend slightly above the 1.33400 mark, which intriguingly is near the 1.33400 vicinity seen last Monday in the currency pair, which was then followed by a variety of reversals and volatility. The Iranian war has begun its forth week. Behavioral sentiment in the broad markets is turbulent. The higher prices of energy are having a ripple effect on outlooks.
Why this is important for the GBP/USD is because sentiment remains tightly geared towards USD centric notions. Risk adverse trading finished loudly going into the weekend and this was mirrored in the GBP/USD which developed strong selling.
True enough the GBP/USD did touch the 1.33000 level on Friday and finished slightly higher with a bounce, but it must be noted that Thursday’s highs for the currency pair were around 1.34685 – which highlights the stronger selling that emerged afterwards.
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Sentiment shifts will continue to be seen and the Iranian war will be the central figure in a lot of the swirling storms. The fear of higher inflation is causing headwinds in the major equity indices. Friday’s lurch downwards certainly was a factor in the USD becoming stronger as U.S Treasury yields went higher. Looking for GBP/USD momentum upwards based on the notion the currency pair is oversold may seem tempting, but quick hitting bets that do not become prolonged emotional battles should remain an important foundation while trying to take advantage of volatility shifts.
1.33000 GBP/USD Level as Support
GBP/USD trading above the 1.35000 was being seen consistently before the onset of the Iranian war. However, last week’s run higher in which Thursday’s marks touched the 1.34685 appear to have been too overconfident.
Yes, financial institutions may believe the GBP/USD is too oversold, particularly below 1.33000, but cautious trading needs to be practiced.
In fact, the GBP/USD was around the 1.32500 mark on Wednesday and Thursday of last week.
The U.S Fed is likely not in a position to cut interest rates as fast as the U.S White House has been aiming for because of the threat of inflation being sparked by higher fuel costs.
And if U.S Treasuries find takers because of higher yields as folks flee to perceived safety, then the GBP/USD may continue to face headwinds near-term.
U.S equity indices need to be watched on Monday and Tuesday, because strong selling on Friday sparked fears of stronger bearish momentum on Wall Street.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.32020 to 1.34650
Day traders wanting to pursue the GBP/USD this week need to be prepared for price action that will continue to illuminate volatility. Looking for sustained momentum upwards may prove costly. While the mid and long-term viewpoints of financial institutions may have been leaning into a stronger GBP, fears of global inflation could cause some difficulties for upwards GBP/USD action to develop that can be sustained. Noise regarding the Iranian war will remain a focus.
While some contrarian traders may say people are reacting with too much fear and may be correct, behavioral sentiment within financial institutions is likely to remain fragile at best in the coming days. The past two Monday’s have provided plenty of speculative price action in Forex and the GBP/USD is likely to experience more of the same early tomorrow. The coming days are likely to prove a complex battle of outlooks as they collide against shifting sentiment storms which could potentially emerge very quickly and prove quite dangerous for day traders with limited resources.
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