Bullish speculators on GBP/USD may have been caught off guard by the speed of price the currency pair managed to achieve last week.
The GBP/USD will start trading this week near levels it hasn’t traded at since April of last year. Last week, GBP/USD hit a low near the 1.24860 mark on Monday afternoon and since then the Forex pair has moved steadily higher with momentary reversals lower factored into the trade as well.
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On the 25thThursday In May, GBP/USD traded near a low of around 1.23025, and after a challenge to the 1.25400 level in early June, the currency pair was near the 1.23725 to 5 ratio.Thursday June. These values are meant to show the volatility of GBP/USD over the past month. The move higher to Friday’s close around 1.28175 was not without choppy results for many speculators.
Friday’s close in sight from the highs reached near 1.28500 is significant. The US Federal Reserve on Wednesday last week, as expected, “paused” interest rate hikes. The Bank of England will announce its official Bank Rate next Thursday and almost all financial institutions expect a 0.25% increase.
Traders remaining bullish on GBP/USD have likely been rewarded over the past two weeks of trading and may be looking for further upside momentum. Technical traders will need to pull the long-term charts to gain perspective on the opportunities ahead for GBP/USD. On the 18Thursday in April last year GBP/USD was trading above 1.30000.
However, before traders blindly jump into long positions without any risk management, the GBP/USD trading rules have not changed. There is still lower turnover and a lot of data and political questions are coming to the Forex market that will affect the daily speculation. Reaching a ratio of 1.28,000 and holding that mark heading into the weekend was a solid result. But risk events are ahead in the coming days via the UK inflation report and its impact on Bank of England rhetoric.
- The US has a bank holiday this Monday and the lack of US participation in the Forex market will cause GBP/USD volumes to be lower than usual.
- CPI numbers will come out of the UK this Wednesday and if the inflation numbers remain strong, this will weigh on GBP/USD trading.
- Thursday’s Bank of England monetary policy summary will be watched for hawkishness in the face of recessionary data and stubborn inflation from Britain.
Speculative price range for GBP/USD is 1.27400 to 1.29500
Last week’s relatively quick and surprisingly strong momentum from GBP/USD was solid for speculators who maintained a bullish outlook. The US Federal Reserve may yet cause fireworks in the Forex market this week with its rhetoric based on the appearance of FOMC member John Williams this Tuesday and Fed Chairman Powell in Washington before the House and Senate committees in the middle of this week. However, the support levels for GBP/USD may prove to be durable and traders may view readings below 1.28000 as buying opportunities if they occur on a stronger decline.
One to watch for inflation results from the UK this week via CPI data. If the inflation numbers come in stronger than expected, this could prompt further GBP/USD buying as it will be seen as more ammunition for the Bank of England to remain hawkish. Any surprise from the inflation data is sure to cause price action in GBP/USD.
The BoE is certainly going to raise interest rates this week, but that has already been traded into GBP/USD. Speculators and financial institutions want to see CPI inflation results this Wednesday for fundamental GBP/USD confirmation on their outlook. If the CPI results are above the expected number, this could cause buying to challenge the higher realms in GBP/USD that have not been seen in over a year. The 1.29000 level could be a target, but day traders must remain realistic about their targets and use conservative risk management.