Last week, GBP/USD continued its weekly rise. After falling to a low last Monday, but not breaking the low of last Friday, the currency pair began to gradually rise.
GBP/USD settled around 1.24790 before entering the weekend. Last week, GBP/USD experienced an interesting series of situations and achieved gains, and the coming week will be another interesting scene for foreign exchange speculators.
Last week started with the absence of US financial institutions, but President Trump did return to the White House of the United States. Poor behavioral sentiment has driven GBP/USD lower since early December, which may contradict the view that the pair finally entered oversold territory on January 13, when 1.21000 was briefly broken. Since then, the rise in GBP/USD has not been stable, but it has certainly produced gains, and last Friday's price action was fascinating.
On Friday, GBP/USD broke through the 1.24000 level, showing its ability to maintain highs. In fact, the 1.25000 level was once favored, but reversed slightly lower over the weekend, triggering some selling. The price speed of GBP/USD has been obvious, reminding day traders to use solid risk management as a safeguard for the pair. Although GBP/USD is a primary currency pair, questions surrounding central bank policy have caused volatility.
The remarks and actions of global central banks will be announced next week and will affect GBP/USD. The Fed and the ECB will take their respective podiums in the coming days. The Fed is expected to take office on Wednesday this week. The ECB is expected to cut its main refinancing rate by another 0.25%. However, if things develop as expected, the driving force for the FX market in the coming week may come from President Trump, who has begun to share his views on interest rates. His support for the Fed's rate cut puts him at odds with the Fed's current stance, which could cause a potential storm in the short term.
While the UK remains mired in dismal economic data, the coming week will only have housing statistics for GBP/USD traders to consider. However, Bank of England Governor Bailey is scheduled to testify to the Treasury Select Committee in London on Wednesday. GBP/USD will react to his shared views.
GBP/USD weakness has been evident since the second week. December is still under a dark cloud. Yes, the upward momentum generated last week shows that the market believes the pair is oversold. Now the question is where behavioral sentiment will lead next week and the week after. Global central banks are in an awkward position. The Bank of England is expected to cut rates, while the Federal Reserve is expected to keep rates unchanged. The outlook is crucial.
Traders need to be cautious. While GBP/USD appears oversold from a historical perspective and the 1.25000 and 1.26000 ratios may look tempting, these prices may be out of reach in the short term. Financial institutions are largely prepared for the Fed and ECB this week, as well as the Bank of England in early February. The question is whether their outlook is correct. Until then, day traders should expect tensions to continue in the coming days. Looking for upside in GBP/USD may be tempting, but a strict set of measures, including stop-losses and profit-taking, should be taken.