What you need to know to trade GBP/USD next week. 📈
How to trade GBP/USD the upcoming week? Let's find out.
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FUNDAMENTALS:
Last week, the EU granted a delay to the chilled meat ban in Northern Ireland, which was one of the reasons for the pound to become quite resilient against most other major currencies, even against the USD bull. However, comments by Bank of England Governor Bailey who warned against a potential over-reaction to inflationary pressures put some selling pressure on GBP and lowered tightening expectations.
Still, the resilience of the GBPUSD pair, despite the rising cases of the Delta virus variant in the UK, shows that markets are still expecting a strong economic rebound in the country.
The US NFP beat estimates but a softer unemployment rate and unchanged wages encouraged USD bears to put some selling pressure on USD. The upcoming US Independence Day (US markets closed on Monday) and the recent USD strength also led to some profit-taking, which put further pressure on the USD.
Overall, markets will likely continue to price-in a Fed rate hike due to the stronger NFP while shaking off the weaker unemployment rate and unchanged wages. With the GBP well supported in the previous period, despite the Delta variant spread and Bailey's comments, markets will likely stick to their bullish GBP bias.
Latest Headlines:
USD News:
US dollar moving to new lows. Now the weakest of the major currencies
US factory orders for May 1.7% versus 1.7% estimate
US stocks are opening higher after less scary jobs report
US Dollar Index retreats from tops post-Payrolls, back around 92.40
US Dollar Index Price Analysis: Next on the upside comes in 93.50
GBP News:
Pound Sterling Price News and Forecast: GBP/USD approaching critical support
UK PM Johnson: We have built up considerable wall of immunity in UK
GBPUSD moves higher and looks to move back above the June low
GBP/USD rebounds swiftly from 2-1/2-month lows post-NFP, upside seems capped
Upcoming Market Reports:
Here are the most important market reports for GBP/USD to follow in the coming days (all times are UTC timezone):
Monday at 12:00: USD Bank Holiday (Expected: , Previous: )
Tuesday at 14:00: USD ISM Services PMI (Expected: 63.9, Previous: 64.0)
Wednesday at 14:00: USD JOLTS Job Openings (Expected: 9.34M, Previous: 9.29M)
Wednesday at 18:00: USD FOMC Meeting Minutes (Expected: , Previous: )
Thursday at 12:30: USD Unemployment Claims (Expected: 375K, Previous: 364K)
Thursday at 15:00: USD Crude Oil Inventories (Expected: , Previous: -6.7M)
Friday at 10:00: GBP BOE Gov Bailey Speaks (Expected: , Previous: )
INTERMARKET:
The recent increase in UST yields on the hawkish Fed shift pushed the 2-year US/UK yield differentials lower. Pound bulls need to keep an eye on this divergence as global yield-chasing could lead to selling pressure in the GBP/USD pair.
USD INDEX
The fall in the US yield curve (bull steepener) after the US labor market report will likely be short-lived due to the hawkish Fed. All eyes will be on the FOMC meeting minutes on Wednesday, especially on the arguing of the seven hawks who voted for a rate hike in 2022 on the Fed dot plot.
In the short-term, the picture looks bearish as the USD Index also broke below a rising trendline (next support at 91.50).
SENTIMENT:
CoT:
Hedge funds and other leveraged money increased their bearish GBP bets while long positioning remained almost unchanged. It's important to note that bullish bets are near 12-month extremes, or at least near the 90 percentile.
USD positioning (according to the USD value of contracts in other currencies) lies near short extremes. Even though bullish positioning increased in the previous week, there is still a possible risk of a short squeeze. This suggests that market positioning is somewhat bearish for GBP/USD.
Currency Strength Index:
Looking at the currency strength chart for the last 4 days, the USD sell-off on Friday pushed the USD significantly lower while the GBP remained almost range-bound.
The fall in US yields across the board could lead to a short-term correction in the USD, although - as mentioned earlier - I believe that markets will continue to price-in a rate hike for 2022 (the FOMC meeting minutes on Wednesday will be a key event for this.)
TECHNICALS
The GBPUSD pair broke above a bearish trendline on the 1-hour chart after facing some support at a long-term (daily) bullish trendline. The intraday bull run on Friday was accompanied by a surge in trading volume, signaling further upside potential during the next week (especially in combination with the picture in the USDx and US yields.)
Levels to follow (Liquidity):
Major resistance: 1.4000
Minor resistance: 1.3870
Minor support: 1.3815
Major support: 1.3730
== SUMMARY ==
I am short-term mildly bullish on GBP/USD.
Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
If you like this post, please leave a "LIKE" for support. Thanks!
FUNDAMENTALS:
Last week, the EU granted a delay to the chilled meat ban in Northern Ireland, which was one of the reasons for the pound to become quite resilient against most other major currencies, even against the USD bull. However, comments by Bank of England Governor Bailey who warned against a potential over-reaction to inflationary pressures put some selling pressure on GBP and lowered tightening expectations.
Still, the resilience of the GBPUSD pair, despite the rising cases of the Delta virus variant in the UK, shows that markets are still expecting a strong economic rebound in the country.
The US NFP beat estimates but a softer unemployment rate and unchanged wages encouraged USD bears to put some selling pressure on USD. The upcoming US Independence Day (US markets closed on Monday) and the recent USD strength also led to some profit-taking, which put further pressure on the USD.
Overall, markets will likely continue to price-in a Fed rate hike due to the stronger NFP while shaking off the weaker unemployment rate and unchanged wages. With the GBP well supported in the previous period, despite the Delta variant spread and Bailey's comments, markets will likely stick to their bullish GBP bias.
Latest Headlines:
USD News:
US dollar moving to new lows. Now the weakest of the major currencies
US factory orders for May 1.7% versus 1.7% estimate
US stocks are opening higher after less scary jobs report
US Dollar Index retreats from tops post-Payrolls, back around 92.40
US Dollar Index Price Analysis: Next on the upside comes in 93.50
GBP News:
Pound Sterling Price News and Forecast: GBP/USD approaching critical support
UK PM Johnson: We have built up considerable wall of immunity in UK
GBPUSD moves higher and looks to move back above the June low
GBP/USD rebounds swiftly from 2-1/2-month lows post-NFP, upside seems capped
Upcoming Market Reports:
Here are the most important market reports for GBP/USD to follow in the coming days (all times are UTC timezone):
Monday at 12:00: USD Bank Holiday (Expected: , Previous: )
Tuesday at 14:00: USD ISM Services PMI (Expected: 63.9, Previous: 64.0)
Wednesday at 14:00: USD JOLTS Job Openings (Expected: 9.34M, Previous: 9.29M)
Wednesday at 18:00: USD FOMC Meeting Minutes (Expected: , Previous: )
Thursday at 12:30: USD Unemployment Claims (Expected: 375K, Previous: 364K)
Thursday at 15:00: USD Crude Oil Inventories (Expected: , Previous: -6.7M)
Friday at 10:00: GBP BOE Gov Bailey Speaks (Expected: , Previous: )
INTERMARKET:
The recent increase in UST yields on the hawkish Fed shift pushed the 2-year US/UK yield differentials lower. Pound bulls need to keep an eye on this divergence as global yield-chasing could lead to selling pressure in the GBP/USD pair.
USD INDEX
The fall in the US yield curve (bull steepener) after the US labor market report will likely be short-lived due to the hawkish Fed. All eyes will be on the FOMC meeting minutes on Wednesday, especially on the arguing of the seven hawks who voted for a rate hike in 2022 on the Fed dot plot.
In the short-term, the picture looks bearish as the USD Index also broke below a rising trendline (next support at 91.50).
SENTIMENT:
CoT:
Hedge funds and other leveraged money increased their bearish GBP bets while long positioning remained almost unchanged. It's important to note that bullish bets are near 12-month extremes, or at least near the 90 percentile.
USD positioning (according to the USD value of contracts in other currencies) lies near short extremes. Even though bullish positioning increased in the previous week, there is still a possible risk of a short squeeze. This suggests that market positioning is somewhat bearish for GBP/USD.
Currency Strength Index:
Looking at the currency strength chart for the last 4 days, the USD sell-off on Friday pushed the USD significantly lower while the GBP remained almost range-bound.
The fall in US yields across the board could lead to a short-term correction in the USD, although - as mentioned earlier - I believe that markets will continue to price-in a rate hike for 2022 (the FOMC meeting minutes on Wednesday will be a key event for this.)
TECHNICALS
The GBPUSD pair broke above a bearish trendline on the 1-hour chart after facing some support at a long-term (daily) bullish trendline. The intraday bull run on Friday was accompanied by a surge in trading volume, signaling further upside potential during the next week (especially in combination with the picture in the USDx and US yields.)
Levels to follow (Liquidity):
Major resistance: 1.4000
Minor resistance: 1.3870
Minor support: 1.3815
Major support: 1.3730
== SUMMARY ==
I am short-term mildly bullish on GBP/USD.
Please hit the 'LIKE' button if you find this post useful. Also, don't forget to follow to get more trade ideas like this. Thanks!
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