GBP/USD Weekly Forecast: Higher Values Seen on Positive Behavioral Sentiment – 25 August 2024

The GBP/USD was trading within it higher realm near the 1.13150 level when financial institutions were handed another dose of positive rhetoric from Fed Chairman Powell regarding lower interest rates.

-- Proving behavioral sentiment is often the main factor in Forex, the GBP/USD climbed with rapid capability when U.S Fed Chairman Jerome Powell reiterated what most financial institutions already knew.
-- The Federal Reserve now believes it is in a position in which interest rates can be lowered. Powell’s delivery certainly opens the door for a rate cut not only in September, but in November too.
-- The Fed which has been criticized for being too passive the past couple of months essentially delivered a green light for USD centric weakness to erupt further.
It needs to be pointed out that a push higher in the GBP/USD currency pair has been underway since late July, but reversals lower have also occurred. The GBP/USD was traversing the 1.3150 vicinity on Friday before Powell’s speech at the Jackson Hole Symposium, and erupted upwards as Powell leaned into the acknowledgement that interest rates are too high.

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Resistance Levels Penetrated and Higher Values Sustained

The GBP/USD went into this weekend near the 1.32070 mark; this is a level that was last traded in March 2022. While economists may have a world of research to show why this move higher occurred, financial institutions simply leaned into their USD weaker outlooks which have been brewing for the past couple of months. In fact financial institutions have thought the USD would be weaker on and off throughout 2023, but trading results have been violent because the Federal Reserve has not been pro-active enough. Before going into the weekend the Fed finally admitted it is time to change Federal Funds Rate policy.

Now the question for day traders will become, has the GBP/USD been overbought at its current price levels? The GBPU/USD closed Friday’s trading showing the ability to sustain highs and did not suffer a major selloff. This coming week the biggest economic data will come on Thursday via the U.S Preliminary GDP reports. This growth data could impact the GDP/USD and cause some volatility in Forex. Traders also need to remain aware the 2nd of September is the Labor Day holiday in the U.S, meaning transaction volumes will start to thin this coming Friday.

Higher Values and GBP/USD Outlook

Now that financial institutions have had their weaker USD outlook confirmed, the question should be asked regarding where equilibrium for the GBP/USD will occur. The current price of the currency pair may look relatively high to traders and tests will ensue tomorrow and Tuesday in which the GBP/USD will certainly see some volatility.

-- However, day traders should not lean into selling positions based on the notion the GBP/USD has been overbought, because financial houses technically may believe higher values are possible.
-- Long-term charts will be needed by technical traders to gather their perspectives and if U.S economic data remains lackluster financial institutions will believe the Fed could cut the Fed Funds Rate more aggressively than considered previously.
GBP/USD Weekly Outlook:Speculative price range for GBP/USD is 1.31100 to 1.33850

Price velocity was very fast on Friday and this leaves the door open to the potential of more volatility early this week. Day traders should be very careful. The ability of the GBP/USD to be trading around the 1.31150 mark before Jerome Powell’s remarks on Friday may serve as a lower support level psychologically for financial institutions. Early trading tomorrow morning should be monitored and if the GBP/USD maintains its current highs this could be an indication financial institutions believe higher ground should be a target over the mid-term.

Day traders should remain realistic and not over leverage their positions. If the GBP/USD remains relatively tranquil going into the U.S GDP numbers on Thursday this could provide an opportunity for another dose of behavioral sentiment impetus. However, no matter even if the growth number is stronger than expected, mid-term sentiment certainly points to a more dovish Federal Reserve, and this means USD centric weakness may remain an important outlook.

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Original Source DailyForex.com provides daily fundamental and technical analysis and signals for those looking to trade based on trends in the currency markets.