GBP/USD: Weekly Forecast 23rd July

After showing signs of wanting to challenge highs early last week, the GBP/USD began to sell off sharply and went into the weekend near lows.

The GBP/USD will begin trading tomorrow near 1.28520, which is a value the currency pair has not traversed in a sustained manner since the 10^th of July. The GBP/USD did climb above 1.31000 momentarily on Monday and fought to its high for the week on Tuesday near the 1.31270 vicinity, before the wheels fell off for bullish traders and values started to see strong selling ignite and continue the remainder of the week.

Inflation data from the U.K. came in slightly weaker than anticipated on Wednesday via the Consumer Price Index readings.  However, economic data from the U.K. remains rather lackluster. Retail Sales on Friday showed a slight improvement across Britain, but Consumer Confidence numbers came in negative. The GBP/USD mustered a high degree of upwards firepower beginning in late May, and although there was a sell-off this past week the currency pair remains within the higher elements of three-month charts.

The U.S. Federal Reserve will release its Federal Funds Rate decision this coming Wednesday and an increase of 0.25% is expected.  However, the news that will shake Forex and the USD/GBP if the Fed raises interest rates as expected will be the FOMC Statement and its outlook. Economic data from the U.S. remains rather complex and financial institutions are concerned about what the U.S. central bank will do moving forward. Just last month when the Fed stopped their hikes, it was understood a July increase would likely happen. But traders remain uncertain about what will occur towards the end of this year.

The highs attained by the GBP/USD early last week challenged values seen on the 13^th and 14^th of July, but financial institutions may have overbought the currency pair momentarily.  But the price velocity downwards in the GBP/USD may now be overdone, and speculators are likely looking at the currency pair and considering their short-term moves, they should take into account that Wednesday’s FOMC Statement from the U.S Fed will rattle the markets and cause volatility.

• Negative outcomes are expected from the Purchasing Managers Index readings from the U.K. tomorrow. The GBP/USD may move slightly after the reports are published.
• Inflation continues to be stubborn in the U.K and financial institutions are likely braced for a rather aggressive Bank of England, but shadows are causing concerns from the British housing sector which is under pressure regarding higher mortgages.

The speculative price range for GBP/USD is 1.27890 to 1.30875

Volatility has been strong in the GBP/USD the past two weeks with fast price changes and this has certainly tested day traders. Equilibrium is being sought by financial institutions as they gather evidence regarding their outlooks on the BoE and Federal Reserve. The Fed’s FOMC Statement will produce price velocity in the GBP/USD as reactions mount. If the Fed gently suggests that inflation in the States is looking better (declining) and that it may be able to take a wait-and-see approach regarding interest rates in the mid-term, this could help the GBP/USD create buying momentum.

As anticipated the GBP/USD has climbed back to its higher price range in the past couple of months which is within sight of historical norms. Traders may feel that any GBP/USD price realms below the 1.28000 level are overdone and this may attract buyers. If the GBP/USD does fall below 1.28000 and sustains ratios near 1.27900, this could catch a large segment of day traders off guard.

The GBP/USD needs solid risk management by traders in the days ahead and the fast results of the past two weeks in Forex have proven this point. Speculators looking for reversals higher should be very cautious until Wednesday’s results from the U.S Federal Reserve. Trading before the FOMC Statement should be quick-hitting, and stop loss and take profit orders should be working. Looking for higher prices seems like the correct consideration, but the GBP/USD can prove all short and near-term perceptions wrong and costly.