The week ended with a jump to the upside for GBP/USD after suffering a fairly stiff fall to lows not seen since mid-June.
GBP/USD speculators continue to face a relatively challenging trading environment in early July. GBP/USD went into the weekend near the 1.26930 ratio, but that only came after the currency pair hit a low near 1.25920 on Thursday. Circumstances for day traders remain volatile, especially for those looking to find lasting short-term trends. Economic data from the UK continues to be worrying, and global central banks have rekindled their inflation warnings with a firm and unified drumbeat.
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GBP/USD’s high last week came on Tuesday when the 1.27600 level was challenged. Relatively strong statements from the Bank of England likely helped the ratio, but then GBP/USD started to sell off as concerns seemed to mount that the Fed might not be done adding to the federal funds rate. US growth statistics certainly added some bearish momentum to GBP/USD on Thursday as gross domestic product results delivered a surprising amount of growth.
With the US Independence Day celebrations taking place this Tuesday, GBP/USD trading will be rather light early this week. But interestingly, the US FOMC Meeting Minutes will be released by the Fed on Wednesday and important jobs data will come from the States on Thursday and Friday. Stronger-than-expected US GDP numbers surprised GBP/USD traders last week, and the realization that the Federal Reserve is likely to raise its interest rate in late July cast a sudden shadow over Forex.
The failure to sustain a move above 1.27000 may be somewhat bothersome for some GBP/USD traders who assumed the momentum would continue. Short-term and short-term conditions this week may remain quite challenging and produce somewhat choppy technical trading until financial institutions feel comfortable with their outlook. However, a jittery mood may prevail this week due to rather light trading volumes likely to factor into GBP/USD due to the US holiday.
- FOMC meeting minutes will echo inflation concerns, but stronger US economic data also worries GBP/USD traders about the Fed’s next moves.
- Manufacturing PMI data due from UK on Monday; the result is expected to be close to last month’s data.
Speculative price range for GBP/USD is 1.25870 to 1.27650
GBP/USD produced quite a large range last week, and while the US holiday will limit volume early this week, it could also increase the potential for unexpected moves if the market is out of balance. The bearish price action has seemingly found a fairly durable level of support near the 1.26,000 mark, yes, GBP/USD briefly traded below this, but the ability to quickly climb back above the mark suggests that financial institutions may consider this to be oversold territory.
Any move below 1.26,000 that holds would likely mean a much stronger US economic data outcome would be known. However, this is unlikely to prove this case. Choppy technical trading near support levels can turn out to be a short-term buying opportunity for speculative buying bets.
While GBP/USD may face headwinds this week as traders seek to gain clarity on the US Fed’s future interest rate policy, one thing appears to be of speculative interest – the BoE may need to remain more hawkish than the US central bank as there may be inflation. to be worse in the UK compared to the states that are moving forward. While short-term traders may not be able to take advantage of this notion, medium- and long-term prospects can continue to bet that the Bank of England will need to raise interest rates more aggressively than the Federal Reserve over the next six months. However, this is also a worrying prospect for the UK due to the impact on mortgage rates, so the BoE may find themselves in a rather difficult spot where they want to hike faster than they actually can.
GBP/USD may have some further upside momentum to develop in the medium term, but trading this week should not be overly ambitious. Looking for a slight upward movement on generated sales can prove productive. The coming week is likely to be highly speculative.
