Friday’s dynamically violent trading on the U.S Nasdaq 100 which saw a fall over 4% of value created a cascade of knock-on effects in the global markets including Forex.
The GBP/USD did correlate with the broad Forex market. A rush of investors’ money into U.S bonds helped create weakness in many major currencies, this as USD centric strength spiked. The selloff in U.S equities may be looked upon as unimportant by some technical Forex traders, but there is no denying there is a sea of corresponding evidence that shows a shift in sentiment caused the violent selloff in the GBP/USD.
Monday’s Trading and Nervous Sentiment Parameters
Tomorrow’s opening in the global markets will likely be rather fast. Day traders who have open positions in the GBP/USD will get a quick start to the day because Asian markets are likely to show a strong dose of reactions since they missed a lot of the selling on the Nasdaq 100 which developed late on Friday in the U.S, which means Asian markets may play a game of catch-up (or in this case catch-down) as financial institutions in the East react. Forex will see early volatility tomorrow.
The question is what will occur when everyone has taken a deep breath. The likely answer is that financial institutions will brace themselves for the return of U.S investors on Monday and see what transpires. Will the U.S selloff on the Nasdaq 100 continue? If heavy stock selling starts tomorrows trading and continues in a rough fashion, it is likely the GBP/USD could find additional pressure lower. However, the dynamic drop in value on Friday may give some folks reasons to believe support in the currency pair will arise.
Near-Term Bets and Obligations in the GBP/USD
While day traders are urged to be cautious tomorrow and watch the price action of the GBP/USD as non-participants if they have limited money in their accounts, for those that want to trade right away risk management and strong stomachs will be ultra important.
-
The U.S will at some point become more calm.
-
The GBP/USD will start to find a comfortable price range.
-
The dive lower on Friday will stop its bleeding. The question is when and what type of price values will start to unfold.
-
Many folks may believe the GBP/USD is oversold, but timing the potential upwards fight that will emerge could be difficult.
-
The U.S this Wednesday will be publishing inflation data via the Consumer Price Index. But first the U.S equity indices will be the story line.
GBP/USD Weekly Outlook:
Speculative price range for GBP/USD is 1.32700 to 1.34500
The GBP/USD was trading at its current values in the middle of May. The lows now being tested look like little room is left for stronger declines. The 1.33000 ratio may be seen as durable support. However, if U.S equity markets tumble lower on Monday it is possible the GBP/USD could test values below that are considered oversold and cause a sea of volatility.
Day traders looking to test their skills and pocketbooks are welcome to look for opportunities, but they need to understand that behavioral sentiment is fragile. If U.S worries continue on Wall Street persists in the days ahead it will cause dynamic price action that may not be easily navigated by retail traders. The U.S inflation reports may be considered important and talk about what the Fed is thinking will get some talking points, but if the U.S equity indices become more calm, the GBP/USD will also react in a more tranquil manner.
Ready to trade our weekly forecast? Check out the best forex trading company in UK worth using.
Robert Petrucci is a Market and Geopolitical Analyst at DailyForex with professional experience in the Forex, commodity, and broader financial markets dating back to 1993. His work focuses on risk analysis, macroeconomic themes, and how geopolitical events affect currencies, commodities, stock indices, and cryptocurrencies. Robert brings a conservative wealth management perspective from his long-standing advisory roles, translating complex market conditions into structured scenarios for traders and investors.
As seen on: Investing.com, TalkMarkets, Angry MetaTraders
