Traders who bet on the wrong side of GBP/USD last week may still be licking their wounds as this trading week is about to begin.
A historic bearish trajectory has taken GBP/USD to lows not seen since 1985. GBP/USD is expected to start trading near the 1.08500 ratio on Monday if a major gap doesn’t break out early on the Forex scene. Last Wednesday’s trade outcome turned sharply bearish as the US Federal Reserve made it clear that further interest hikes would occur. However, Britain threw a further match into the already hot atmosphere, when it announced a fresh round of stimulus and tax cuts at the weekend.
The downtrend in GBP/USD probably even surprised traders who thought the currency pair was going to sell off. Anyone who was targeting values near the 1.09000 mark and had a short position that was lit 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 some trading accounts.
GBP/USD may be oversold, but why stand in front of an oncoming train
The downward trend in GBP/USD has been historic. Coronavirus and Brexit era lows have been swept away. A long term chart is needed to judge the current situation and the frenzy the GBP/USD currency pair is having as it sank like a stone. GBP/USD apparently traded near the 1.05300 ratio for a brief period in January 1985 when MTV was still popular among children.
- The UK raised interest rates last Thursday in an attempt to support GBP/USD, but the Bank of England’s 0.50% hike did not calm financial institutions.
- Technical traders looking to assess potential lows should now consider the jittery fundamental sentiment that has erupted in GBP/USD.
GBP/USD support levels are theoretical and higher reversals are likely desired
Traders should exercise extreme caution with GBP/USD. While it’s easy to assume that GBP/USD’s price action this coming week won’t match the dynamic results of recent trading days, the idea that all will be quiet this coming week certainly isn’t. guarantee. Global markets look jittery and there’s reason to suspect that central banks, including the Bank of England, aren’t done making sudden statements on policy. Financial firms, through their analysts, said late last week that the BoE should raise interest rates again quickly to help stabilize GBP/USD.
Fundamentals may not be what technical traders want to hear, but it’s behavioral sentiment and government interventions by central banks that are making Forex produce historic values.. The UK government, via its tax cut and stimulus package late last week, does not appear ready to “force” the BoE into another sudden unannounced interest rate hike in the coming days to try to support the GBP/USD. But who knows? Perhaps 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 seek out higher price action and think GBP/USD is oversold are to be applauded, but they may also want to be extremely cautious about their optimism. GBP/USD suffered from a fierce downtrend that literally shattered support with ease in the last week of trading.
While it may seem hard to believe that major new sales are going to happen and another sale can’t happen, is that a far-fetched prospect? If GBP/USD begins Monday’s trading with lower prices and the Forex pair struggles to maintain current short-term support near the perceived 1.08500, more selling could ensue. If the 1.08000 level somehow starts to come under pressure and the 1.07900 mark is flirted, not only will traders get nervous, but so will the UK government and its citizens.
As all-time lows are challenged by GBP/USD, traders should monitor the situation carefully and increased risk management is essential. Speculators who want to be buyers based on the belief that an upside reversal will occur this week cannot be blamed. However, bottom fishing in the GBP/USD can be extremely dangerous and costly. If traders decide to be bullish and look for upward price action, they need to be realistic with goals. Quick conditions are likely this week in GBP/USD and traders hoping for calmer waters may want to be on the lookout and watch from the sidelines.
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