GBP/USD: Weekly Forecast 30th July

The GBP/USD provided traders with rather quick results all of last week, as its price range was certainly tested, but by the end of the week returned to a known value.

The GBP/USD will start the coming week near the 1.28470 ratio after a week of rather choppy results being displayed.  While the Federal Reserve and European Central Bank delivered their expected interest rate hikes last week, the Bank of England will join the party Thursday of this week and is expected to raise the Official Bank Rate by 0.25%. Traders who went on holiday last week and are returning, after not looking at Forex may wonder why behavioral sentiment is rather nervous, after all the GBP/USD is essentially positioned where it was last Monday.

After moving to a high of nearly 1.29975 on Thursday, the GBP/USD suddenly stumbled lower when a rather strong GDP outcome from the U.S. was published.  Financial institutions which have been embracing a bullish outlook for the GBP/USD once again had to pump their brakes based on the notion a strong U.S. economy could keep the Federal Reserve proactive regarding interest rate hikes.

However, traders were given another surprise jolt after inflation results via economic data in the U.S. on Friday actually came in weaker than expected.  After stumbling to a low of nearly 1.27600 on early Friday, the currency pair started to reverse higher. Behavioral sentiment appears rather sensitive for the time being in the GBP/USD and a look at a one-month chart also shows the value of the Forex pair is in the middle of its range.

The 1.28000 ratio was able to create a target for bullish traders when the GBP/USD stumbled early Friday, after the stronger Gross Domestic Product statistics from the States. However, the GBP/USD ability to climb and finish the week where the currency pair started leaves more potential for bullish speculators to wager in the coming days via their perceptions.  This coming week the U.S. will release important manufacturing and jobs data, along with another key inflation outcome to judge. Until Thursday’s Bank of England’s Monetary Policy Summary rhetoric, traders should anticipate additional choppiness from the GBP/USD near-term.

• While most traders anticipate a hike from the BoE this Thursday, the comments from Governor Bailey will be listened to intently for signals that the BoE is considering a pause in the mid-term regarding further increases to the key interest rate. This may not happen.
• While U.S jobs numbers will grab headlines at the end of this week, speculators should keep their eyes on Average Hourly Earnings statistics on Friday.
• If the U.S. inflation numbers via wages paid to workers show signs of decreasing, this could spur on GBP/USD buying late this week, but it is a big ‘if’.

The speculative price range for GBP/USD is 1.27575 to 1.30385

The GBP/USD provided plenty of choppy trading opportunities for speculators last week and price equilibrium is still being sought.  While the GBP/USD finished the week almost where it began, the large price range displayed over the past five days is an indication Forex markets are nervous and looking for direction still. Support levels held last week near the 1.27600 mark, but another test of this low and actually penetration below would be a bad short-term signal for the GBP/USD. However, speculators and many financial institutions still may view this lower support level as oversold territory.

The trick here for behavioral sentiment readings may be the notion that a lot of the bad news for the GBP/USD is already known because of anticipated Bank of England actions. If the BoE delivers its anticipated interest rate hike and U.S. data shows signs of lackluster manufacturing and then follows it with a decrease in the Average Hourly Earnings, this would be a good spark for the GBP/USD. However, those outcomes are not guaranteed. U.S. data has proven hard to forecast recently. Traders should remain cautious this week. Speculators looking for upside momentum from the GBP/USD cannot be faulted, but they should remain alert to all economic data being published.