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• Shifting sentiment in the broad Forex market remained the theme last week. The GBP/USD correlated to the large Forex world with a rather volatile, yet predictable in many respects type of song and dance routine that has been seen before.
• The GBP/USD went into this weekend below the 1.35275 vicinity it had the previous week. However, this doesn’t mean the bearish action was necessarily the dominant player in the GBP/USD.
• A low of nearly 1.34190 was seen this past Wednesday. Prior to the low the GBP/USD incrementally sold off towards this depth, because it appeared financial institutions started to realize the U.S Federal Reserve’s talk about an interest rate cut in September didn’t mean another rate cut in October would also have to be seen.

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U.S Data Stirring the GBP/USD Ship

However, on Thursday of this past week the U.S GDP numbers were released and this report reversed sentiment once again. The GBP/USD saw a rather sunny amount of buying, but it should be pointed out the high around the 1.35300 seen this past Thursday remained below the high seen the previous week of nearly 1.35470. The upwards price action late this past week occurred when U.S GDP numbers came in stronger than expected and the GDP Price Index met tame expectations. But the show didn’t end there. Because headwinds appeared.

Friday’s price action saw the GBP/USD fall to the 1.34485 ratio when U.S Personal Consumption Expenditures met expectations. A good question is why this inflation report would have affected financial institutions more negatively than Thursday’s inflation data? Perhaps news media hyperbole scared financial institutions that reacted to the noise, but as calmer heads prevailed again, suddenly the GBP/USD climbed again and went into the weekend at 1.35047.

More Economic Data to Come for the GBP/USD

Day traders need to remember tomorrow is a U.S holiday. Meaning volumes in Forex will be significantly lower than normal. The GBP/USD did finish last week above the 1.35000 level in a sustained manner, but tomorrow’s price action should not be trusted entirely.

• Only when the large U.S investment houses return to action on Tuesday will a true barometer of the Forex market be possible.
• The U.S will release jobs numbers this coming Friday, and this will throw some fuel onto the GBP/USD as financial institutions try to figure out what the Federal Reserve’s interest rate policy will be in the months ahead.
• Uncertainly continues to be heard from certain talking heads in the financial world, and day traders should understand that some of these folks speaking have bias due to their political leanings.
• The U.S jobs numbers will certainly stir the GBP/USD if the number from the Non-Farm Employment Change results comes in weaker than expected, this would likely spur GBP/USD buying.

GBP/USD Weekly Outlook:

Speculative price range for GBP/USD is 1.34625 to 1.36200

The ability to finish above the 1.35000 can be interpreted positively by GBP/USD bullish perspectives. However, the fact that the currency pair also finished below the previous week’s close shows without a doubt that financial institutions continue to shift their sentiment nervously on a daily basis. The 1.34700 to 1.35300 realm may be viewed as the accepted equilibrium of the GBP/USD currently, but it will likely not hold. Day traders need to acknowledge that what they perceive as large volatile moves in the currency pair are not seen the same way by larger players.

Risk management needs to be treated with respect this week. The lower trading volumes tomorrow could open the door for sudden impetus on Tuesday. Certainly leading up to Friday the GBP/USD will see shifting winds as financial institutions start to position themselves ahead of the U.S jobs data. Speculators need to remain cautious. The notion that the GBP/USD should be higher than it currently is may feel logical, but uncertainty about the U.S Fed’s interest rate policy remains a headwind. More impetus is needed to create stronger buying action in the GBP/USD.

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