GBP/USD: price velocity strikes downward via speculative forces
After showing signs of wanting to challenge the rallies early last week, the GBP/USD pair started selling off sharply and entered the weekend near the lows.
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Tomorrow the GBP/USD will start trading near 1.28520, a value that the pair has not broken in a sustainable way since July 10th. The GBP/USD rose above the 1.31000 level temporarily on Monday and fought to its highest level during the week on Tuesday near the vicinity of 1.31270, Before the bullish traders calmed down, the values started to witness strong selling, which will continue for the rest of the week.
Inflation data from the UK came in slightly weaker than expected on Wednesday with CPI readings. However, the economic data from the UK is still somewhat lackluster. On Friday, retail sales showed a slight improvement across Britain. However, consumer confidence numbers came in negative. The GBP/USD has amassed a high degree of upward strength starting in late May, and despite a sell-off last week, the pair remains within the higher elements of the 3-month charts.
GBP/USD traders will have to deal with the US Federal Reserve this week
The US Federal Reserve will announce its decision on the federal funds rate next Wednesday and it is expected to rise by 0.25%. However, the news that will shake the forex and USD/GBP if the Fed raises interest rates as expected will be the FOMC’s statement and outlook. Economic data out of the US is still somewhat complex and financial institutions are concerned about what the US central bank will do going forward. It was only last month when the Fed halted its increases that it was understood that the increase in July would likely happen. But traders are still not sure what will happen towards the end of this year.
The gains made in the GBP/USD early last week were defying the values seen on July 13th and 14th, but financial institutions may have temporarily overbought the pair. But the downward price velocity in GBP/USD may be exaggerated now, Speculators are likely to look at this pair and think about their short-term moves, they should keep in mind that the Federal Open Market Committee statement issued by the US Federal Reserve on Wednesday will shake the markets and cause volatility.
The UK’s Manufacturing and Services PMI data will be released on Monday
A negative PMI reading from the UK is expected tomorrow. GBP/USD could move slightly after the reports are released. Inflation remains stubborn in the UK and financial institutions are likely to brace for a somewhat aggressive Bank of England, but there are concerns about the UK housing sector which is under pressure regarding rising mortgages.
The speculative price range for GBP/USD is from 1.27890 to 1.30875
Volatility has been high in the GBP/USD over the past two weeks with rapid price changes, and this has definitely tested day traders. Financial institutions seek balance as they gather evidence regarding their expectations about the Bank of England and the Federal Reserve. The FOMC statement will result in GBP/USD velocity as reaction mounts. If the Fed nicely signals that US inflation looks better (fading) and they might be able to take a wait-and-see approach to interest rates in the medium term, that could help the GBP/USD create buying momentum.
As expected, The GBP/USD has climbed back into a higher price range over the past two months and is near historical benchmarks. Traders may feel that any price ranges for GBP/USD below 1.28000 are overdone and this may attract buyers. If the GBP/USD falls below the level of 1.28000 and continues to maintain the ratios near the level of 1.27900, this may surprise a large segment of the day traders.
The GBP/USD needs strong risk management by traders in the days ahead and the quick results of the past two weeks in forex have proven this point. Speculators looking for higher reversals should remain very cautious until Wednesday’s results from the US Federal Reserve. Trading ahead of the FOMC statement should be fast, and stop-loss and take-profit orders should work. Looking for higher prices seems to be the right consideration, but the GBP/USD could prove all short and near term scenarios wrong and costly.
2023-07-24 00:48:07
#Weekly #forecast #British #pound #dollar
