Traders betting on the wrong side of the GBP/USD last week may still be licking their wounds as this week of trading gets set to begin.
A historic bearish trajectory took the GBP/USD to lows it has not seen since 1985. The GBP/USD supposedly will begin trading on Monday near the 1.08500 ratio, this if a major gap doesn’t explode onto the Forex scene early. Last Wednesday’s trading result became strongly bearish when the U.S Federal Reserve made it clear more interest hikes would come. However, Great Britain threw an additional lit match into the already hot atmosphere, when they announced a new round of stimulus and a tax decrease late in the week.
The downward trend of the GBP/USD likely even surprised traders who felt the currency pair was going to selloff. Anyone who was targeting values near the 1.09000 mark and had carried a selling position which had been ignited above the 1.10000 ratio is probably celebrating. However, the pain of being on the wrong side of the trade was probably intolerable for some and may have killed trading accounts.
The GBP/USD may be Oversold, but why Stand in Front of an Oncoming Train
The trend lower in the GBP/USD has been historic. Lows from the days of coronavirus and the Brexit have been brushed away. A long term chart is needed to judge the current plight and delirium the GBP/USD currency pair is now achieving as it has sunk like a stone. The GBP/USD apparently traded near the 1.05300 ratio for a brief time in January of 1985, this when MTV was still popular among the kids.
- The U.K did raise its interest rates last Thursday in an attempt to bolster the GBP/USD, but the hike of 0.50% by the Bank of England did not calm financial institutions.
- Technical traders looking to gauge potential lows, now have to consider the nervous fundamental sentiment that has burst into the GBP/USD.
GBP/USD Support Levels are Theoretical and Reversals Higher are likely being Wished Upon
Traders will need to practice extreme caution with the GBP/USD. While it is easy to assume the price action of the GBP/USD this coming week will not match the dynamic results from the last handful of trading days, the notion that all will be calm this coming week is certainly not guaranteed. The global markets appear nervous and there is reason to suspect central banks including the Bank of England are not done making sudden statements on policy. Financial houses via their analysts were heard saying late this past week that the BoE will have to raise their interest rate again quickly to help stabilize the GBP/USD.
Fundamentals might not be what technical traders want to hear, but it is behavioral sentiment and government interventions led by central banks that are causing Forex to go produce historic values. The British government via its tax cut and stimulus package late this past week, doesn’t look ready to ‘force’ the BoE into another sudden interest rate hike unannounced in the coming days to try and bolster the GBP/USD. But who knows? Maybe another surprise will come unexpectedly.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.06900 to 1.10800
Traders who feel tempted to look for upside price action and believe the GBP/USD is oversold need to be applauded, but they may also want to be extremely careful regarding their optimism. The GBP/USD has suffered from a ferocious bearish trend which literally destroyed support with ease the past week of trading.
While it may seem hard to believe further strong selling is going to occur, and another selloff cannot happen, is it a farfetched prospect? If the GBP/USD begins Monday’s trading with lower price action and the Forex pair finds it hard to sustain current short term support near the perceived 1.08500, more selling could ensue. If the 1.08000 level somehow begins to see pressure and the 1.07900 mark is flirted with, not only will traders get nervous, but so will the U.K government and its citizens.
As historic lows are challenged by the GBP/USD traders need to monitor the situation carefully and heightened risk management is essential. Speculators who want to be buyers based on the belief a reversal higher will develop this week can develop cannot be blamed. However, bottom fishing in the GBP/USD may prove to be extremely dangerous and costly. If traders decide to be bullish and look for upside price action, they should be realistic with targets. Fast conditions are likely this coming week in the GBP/USD and traders wishing for calmer waters may want to remain spectators and watch from the side.