Created on December 29, 2024

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The GBP/USD finished the week near the 1.25700 level, as the lower range of the currency pair continues to see plenty of tests and nervous sentiment appears to be creating headwinds.

Holiday trading in Forex created rather tight ranges for most major currencies last week and the GBP/USD was no exception. The lower elements of the GBP/USD remain the status quo as USD centric strength continue to be exhibited. Financial institutions were open for business before going into the weekend, but volumes were lackluster and trading in Forex this coming week will be relatively quiet too.

The GBP/USD is near important support ratios that are definitely being watched by large financial institutions. The 1.25000 ratio remains an important psychological level which came within sight early and late last week, this until a slight buying surge returned the GBP/USD to a more comfortable looking value and within talking distance of the 1.26000 level. However, the currency pair is certainly facing tests and these will not disappear this coming week.

Speculative Near-Term Considerations for the GBP/USD

Traders who believe the GBP/USD is oversold should be careful. The GBP/USD suffered when the Bank of England was overly cautious on the 19th of December and kept their interest rate in place. The BoE is practicing extreme caution even as the U.K economy is lackluster. The economic picture for the U.K is unlikely to see a vast amount of improvement in the mid-term. Yes, the Bank of England is nervous about inflation, but better fiscal policy would help the inflation fight.

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The testing of the 1.25000 level as behavioral sentiment in financial institutions is nervous about Bank of England policy and also fragile because of USD centric strength make for a volatile mid-term to come. President-Trump’s takeover of the U.S White House has been digested, and now attention has turned to U.S Fed policy which is becoming more cautious. If U.S interest rates are not lowered over the mid-term, and the BoE must consider an interest rate cut this sets the stage for more potential weakness in the GBP/USD via financial institutional outlook. Light holiday trading this week will not seek to bet against these mid-term notions. A lack of clarity is not helping.

A New Lower Range for the GBP/USD Mid-Term

After having attained values in September above the 1.34000 level, the GBP/USD looks oversold. However, conditions have changed regarding outlook for the currency pair and they are not about to alter dramatically. Speculators who have bias towards the GBP/USD should make sure they are not betting on notions that have no foundation.

• Looking for a sustained move higher with solid price velocity in the near-term is not likely going to see good result.
• Instead traders of the GPB/USD this coming week should be prepared to see the 1.25100 to 1.25900 range get plenty of price action.
• Volumes may be solid tomorrow, but by early Tuesday Forex will again become very quiet and this will remain the case into Thursday.
• Friday of this week could see some more action as financial institutions position for the opening of the following week when volumes are certain to increase.

GBP/USD Weekly Outlook:

Speculative price range for GBP/USD is 1.25030 to 1.26070

The GBP/USD may appear to be in oversold territory to some speculators, but the price action of the currency pair matches the dynamics of the broad Forex market. Until sentiment begins to stabilize there will be no sudden shifts of momentum upwards for the GBP/USD that are sustained. The lower realms of the GBP/USD getting tested consistently the past week may see another round of these depths emerge.

Support did seem to be fairly strong around the 1..25100 mark with some outliers lower and perhaps this will continue to be the case in the coming days. Traders who want to participate in the GBP/USD like all of Forex this week should not be overly ambitious and be on the lookout for sudden bursts if large trades are transacted in inactive markets. Retail traders are reminded to use entry price points in Forex this coming week because spreads will widen in quiet conditions.