The GBP/USD finished trading at the lows for the week on Friday following a rather bearish trend which had been demonstrated over the past handful of days.
- The GBP/USD will start the week near the 1.27315 ratio early on Monday.
- The currency pair experienced a week of downwards momentum for the most part.
- Having started near the 1.28600 vicinity on Monday, following a high produced on Friday the 8th of March when the GBP/USD traded near the 1.28965 ratio briefly, the currency pair has certainly exhibited a downturn.
After starting the week out lower, the GBP/USD did climb for a moment on Tuesday before the U.S inflation data via the Consumer Price Index was released, but again the U.S statistics showed inflation remained stubbornly strong. Trading became choppy and a low around 1.27450 was seen on Tuesday and then more choppy movement occurred in the GBP/USD. Once again financial houses showed their optimistic bullish colors and took the GBP/USD a bit higher on Thursday and a mark of 1.28240 was approached, but then U.S Producer Price Index numbers came in higher than anticipated turning things southwards.
When the PPI data from the U.S proved surprisingly powerful, meaning inflation continues to show it isn’t about to easily vanish, the GBP/USD turned lower quickly and flirted with the 1.27300 level. Things did not improve for bullish traders on Friday and the currency pair went into weekend essentially hugging its lower depths.
Bearish traders certainly were able to test downside price action last week, but GBP/USD should brace for the potential of more volatility this week. U.K inflation numbers will be delivered on Wednesday and then the U.S Federal Reserve will step into the limelight and bring forth their FOMC Statement. No change to interest rates will come this week from the U.S central bank, nor from the Bank of England on Thursday unless there are major surprises. Causing the choppiness in the GBP/USD is the rather poor economic data results from the U.S and U.K combined. The effect is creating a cloudy picture regarding outlooks for the mid-term. Patience is required.
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Trading perspective is important for speculators. While the GBP/USD saw downward momentum last week, the ability of the currency pair to remain above the 1.27000 ratio may be looked upon as fair market value by financial institutions and a positive result for the GBP. Many large traders have positioned for a weaker USD, and are trying to remain patient regarding potential interest rate cuts from the Fed, but the stubborn U.S inflation remains problematic and is causing choppy technical charts to emerge.
- The start of trading on Monday will be important to help determine behavioral sentiment for short-term traders. If the GBP/USD continues to test lows this would be a bearish sign as the week begins.
- If the GBP/USD remains within its current price levels, this will indicate that current support and resistance levels may stay in focus over the first couple of days this week.
The CPI statistics from the U.K will be important and if they come in higher than expected this may hurt the GBP/USD a bit on early Wednesday. While the Bank of England is highly unlikely to lower its interest rates on Thursday, a higher inflation number the day before may cement the notion the BoE will have to remain quite cautious about becoming dovish until the U.S Federal Reserve also changes direction. Choppy trading should be expected by traders this week.
The current price range of the GBP/USD may feel like the ‘right price levels’ but the downturn in the GBP/USD may have some additional fuel to burn early this week. Risk management should be used and speculators should monitor results in the currency pair closely on Monday and Tuesday to consider where short-term behavioral sentiment resides. While some traders may believe the GBP/USD should be trading at higher levels, this might not be demonstrated in a strong manner this coming week.
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