The GBP/USD continued to march upwards last week as the currency pair has not only fought off lows, but has begun to come within sight of ‘accepted’ price equilibrium.
Speculators who have been anticipating another solid bout of selling pressure to erupt in the GBP/USD have likely become frustrated the past couple of weeks. Certainly reversals lower in the GBP/USD are part of the landscape in Forex, but it appears for the moment that the worst of the bearish trend in the GBP/USD has been brushed away. Last week’s low for the GBP/USD was on Monday the 7th of November.
Intriguingly the low which was put in early last week didn’t break through the lows seen in the previous two days of trading, meaning technically the GBP/USD has incrementally build stronger support levels. While fundamental data elements within the GBP/USD still remains rather negative, it does seem from a speculative viewpoint that behavioral sentiment has shifted and technically driven trading is driving momentum upwards.
Perhaps the Worst of the News has been digested by Financial Houses for the GBP/USD
While economic conditions regarding inflation and recessionary data remain troublesome, many financial houses may be looking at mid and long-term prospects for the GBP/USD and wagering on upside. As one of the most traded currency pairs globally, the GBP/USD is a solid barometer of behavioral sentiment and its results the past two weeks do mirror what seems to be a tidal shift in direction for the USD.
- This past Friday, U.K GDP data came in more negative than expected with a drop of 0.6% compared to the estimate of 0.4%, but the GBP/USD still managed to rise significantly before going into the weekend.
- This coming Wednesday, the U.K will conduct its Monetary Policy Report Hearings with Bank of England members speaking, but there are unlikely to be many major surprises.
Upwards Momentum has been fast so Traders may want to be Cautious about Reactions
The GBP/USD is set to begin this week of trading near the 1.18300 ratio, the last time this value had been seen was on the 26th of August. Speculators should not get too over confident regarding the bullish trend upwards which has been demonstrated the past week, but they should not be fearful of the direction either. Risk management which guards against the potential of sudden downturns should be used. Day traders as always need to keep their perspectives geared towards price action which takes into account hourly gyrations.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.15690 to 1.20750
Support below technically does look rather impressive. It seems farfetched to believe the GBP/USD is suddenly going to resume its immense bearish trend and find it breaking below 1.10000 anytime soon. Yes, it could happen, but more likely are polite technical tests of nearby ratios which could be natural targets via transactions in the GBP/USD being generated by financial houses. Certainly the 1.18000 level should be watched. And support near the 1.17300 mark appears to be significant since it was the high achieved on Thursday, this before price velocity increased and the GBP/USD jumped higher on Friday.
If the 1.17000 mark should become vulnerable a test of the 1.16700 to 1.16200 should be watched. Anything below the 1.16000 ratio this week would be a reaction to negative market news being generated which is an unknown quantity at this time. Risk management should be used, and traders looking to short the GBP/USD should make sure their targets are realistic, because it doesn’t appear a truly profound change in attitude is going to develop short-term.
Speculators who want to take advantage of the current upside movement should remain optimistic, but cautious. The GBP/USD has gained a substantial amount the past two weeks. Financial houses and speculators are certainly use to seeing the GBP/USD trade near the 1.20000 and higher, but the bullish trend which saw plenty of price velocity upwards last week could slow down for a moment and take a breather. Traders may want to remain bullish, but conservative speculators may want to wait for support levels to be touched before they trigger buying positions in the GBP/USD. After suffering a long term bearish trend, the GBP/USD may be changing direction, but it is unlikely to follow a one way path higher. Buying caution is advised.
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