Photo by Colin Watts on Unsplash 

The GBP/USD started last Monday around the 1.33785 mark and finished on Friday around the 1.34978 ratio. The GBP/USD correlated well to other major currencies which gained against the USD most of last week. Holiday season price action which began last week certainly brought lighter volumes.

But while some may question the gains made in the GBP against the USD, it does appear behavioral sentiment has shifted as weaker USD centric attitudes prevail.

Sustained higher values going into the weekend may be looked at suspiciously by some speculators of the GBP/USD, but the currency pair is touching values seen in late August and in September of this year without actually challenging higher apexes. The 1.34978 heights clearly have 1.35000 within sights and financial institutions may have interesting near-term decisions to make in the days ahead leading into the New Year’s holiday.

Mid-Term Outlook and Near-Term Reactions

The GBP/USD did touch the 1.36000 level rather consistently in late August and September of this year. In fact the 1.37000 mark was also penetrated briefly on the 17th of September. That doesn’t mean that the 1.34978 ratio now displayed is cheap, but implies that shifting mid-term outlook which views USD weaker centric price action as a possibility due to upcoming power shifts in the U.S Federal Reserve, may be impacting financial institutions now and the way they are positioning the GBP/USD.

(Click on image to enlarge)

The U.S released a better than expected GDP report last week, but its results were published late, due to the government shutdown a couple of months ago, thus its results are being debated. The Federal Reserve’s next FOMC meeting is in late January and opinion varies regarding what the central bank will do regarding interest rates in the immediate future. However, this Tuesday, yes, while a lot of the financial markets are not paying attention because of being on vacation, the Fed will release its FOMC Meeting Minutes report. The Fed’s publication this week could prove lively reading, because it is known that open disagreements are brewing among the FOMC voting members. Who will be paying attention?

Holidays and Speculative Trading

Holiday trading volumes are certainly going to impact the markets this coming week. However, the GBP/USD is one of the most heavily traded currency pairs in the world.

• Forex traders will be active on Monday and Tuesday of this week, while the volumes will not match normal trading conditions, the GBP/USD should be watched along with other major currency pairs.
• Sentiment shifts in Forex regarding the USD may make the first couple of days trading this week worthwhile.
• Volumes will come to a crawl on New Year’s eve and Friday’s price action may be quite quiet too.
• A key barometer may be the 1.35000 level, but traders need to be prepared for possible volatile conditions and the prospect of sudden spikes from large orders that are imbalanced.

GBP/USD Weekly Outlook:

Speculative price range for GBP/USD is 1.34310 to 1.35430

The move higher in the GBP/USD mirrored movements in the EUR and other currencies against the USD this past week. Cautiousness the week before, suddenly changed into a more optimistic approach regarding USD centric weakness potential early this past Monday and the sustained move higher didn’t produce a reaction reversal. The lack of a strong reversal, and the ability to easily stay above the 1.34000 level and then the 1.34500 mark is an indication the GBP/USD has traction.

Due to the holiday season and lighter volumes than normal being seen in Forex, traders should remain careful and not get overly ambitious. If the 1.35000 ratio is penetrated and sustained this could indicate financial institutions believe the GBP/USD is within a sincere bullish trend. Speculators aiming for the highs attained in September of this year should not get greedy. The potential for a reactionary bout of selling in the GBP/USD with light volumes prevalent is a danger.

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