GBP/USD: Complete Weekly Outlook (July 12-16) 🔥
My complete weekly outlook for GBP/USD.
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FUNDAMENTALS:
After reaching fresh 2-week highs on Friday, the GBPUSD pair fell sharply overnight as the US dollar firmed with higher UST yields. Markets remain cautious on GBP as the United Kingdom proceeds with their reopening plan, despite a surge in daily infections to around 31k. However, hospitalizations remain low, 90% of the UK population has covid-19 antibodies, and the country is also one of the leaders in vaccination rates. This supports my bullish bias in the currency for the week, assuming risk sentiment remains supportive and the USD continues to slide.
Latest Headlines:
USD News:
- US Dollar Index Price Analysis: Recovery targets 92.85
- US futures mixed ahead of North American trading
- Fed's Barkin: If labour market takes longer to recover, tapering goes a little later
- Fed's Barkin: Labor market hasn't healed enough to taper bond buying – WSJ
- US Dollar Index regains traction around 92.20
GBP News:
- GBP/USD: Sterling set to suffer as “Freedom Day” may be less free than earlier anticipated
- GBP/USD now targets 1.3900 and beyond – UOB
- GBP/USD retreats from two-week tops, flirts with session lows near 1.3885-80 area
- Pound Sterling Price News and Forecast: GBP/USD teases 1.3900 on softer USD, risk-on mood
- GBP/USD teases 1.3900 on softer USD, risk-on mood
- Pound Sterling Price News and Forecast: GBP/USD in a third week of declines? Delta, data and dollar
Upcoming Market Reports:
Here are the most important market reports for GBP/USD to follow in the coming days (all times are UTC timezone):
Tuesday at 12:30: USD CPI m/m (Expected: 0.5%, Previous: 0.6%)
Tuesday at 12:30: USD Core CPI m/m (Expected: 0.4%, Previous: 0.7%)
Tuesday at 17:01: USD 30-y Bond Auction (Expected: , Previous: 2.17|2.3)
Wednesday at 06:00: GBP CPI y/y (Expected: 2.2%, Previous: 2.1%)
Wednesday at 12:30: USD PPI m/m (Expected: 0.6%, Previous: 0.8%)
Wednesday at 12:30: USD Core PPI m/m (Expected: 0.4%, Previous: 0.7%)
Wednesday at 14:30: USD Crude Oil Inventories (Expected: , Previous: -6.9M)
Wednesday at 16:00: USD Fed Chair Powell Testifies (Expected: , Previous: )
Thursday at 10:00: GBP MPC Member Saunders Speaks (Expected: , Previous: )
Thursday at 12:30: USD Unemployment Claims (Expected: 350K, Previous: 373K)
Thursday at 12:30: USD Philly Fed Manufacturing Index (Expected: 27.8, Previous: 30.7)
Thursday at 13:15: USD Industrial Production m/m (Expected: 0.6%, Previous: 0.8%)
Thursday at 13:30: USD Fed Chair Powell Testifies (Expected: , Previous: )
Friday at 12:30: USD Retail Sales m/m (Expected: -0.5%, Previous: -1.3%)
Friday at 12:30: USD Core Retail Sales m/m (Expected: 0.4%, Previous: -0.7%)
Friday at 14:00: USD Prelim UoM Consumer Sentiment (Expected: 86.5, Previous: 86.4)
INTERMARKET:
Yields:
Yield differentials remain supportive for the pair due to the slide in US 2y yields over the last two weeks. This is a bullish sign for the pair.
SENTIMENT:
CoT:
The GBP is one of the rare majors that saw an increase in positioning against the USD in the last week (along with the JPY). Net long positioning in GBP rose to $1.9 billion, but it's worth noting that fast money has reached a 12-month extreme, which poses a downside risk for the pound.
Currency Strength Index:
GBP is slowly building its bull trend while the USD remains somewhat flat against other majors for the last 6 trading days. Today, risk-off supported the USD and JPY overnight, but the picture is changing ahead of the NY open, with risk currencies (and the pound) recovering some ground and the USD retreating from daily highs.
Risk Reversals:
While risk reversals are still skewed to the downside, it's worth noting that GBP call options are recovering vs similar out-of-the-money put options, signaling that investors are increasingly protecting against higer prices in the pound.
* Comment: In the FX market, risk reversals refer to the difference between the implied volatility of the most popular out-of-the-money calls and puts with the same expiration. Higher demand for an options contract increased its volatility and price. Therefore, a positive risk reversal signals that upside protection in the pair is relatively more expensive than downside protection, suggesting that investors are speculating on a rise in the currency.
TECHNICALS
Price-Action:
GBP/USD broke above a bearish trendline and reached fresh 2-week highs, were sellers pushed the price lower overnight. The pair is now finding support at the broken trendline, near the 50% Fib level of the latest bullish impulse move and a horizontal support area. The short-term trend is turning bullish, but 1.3830 (and 1.3815, the 61.8% Fib) need to hold for buying opportunities to emerge.
Pound pairs are famous for their deeper corrections, so the 61.8% Fib may be in play. However, risk tolerant traders may also use the 1.3830 level (which aligns with a horizontal support) to build their long positions.
It's also worth noting that today's (Monday) bear run is accompanied with decreasing volume, signaling that a turning point may be near.
Levels to follow (Liquidity):
Major resistance: 1.3909 (weekly high)
Minor support: 1.3815 (61.8% Fib)
Major support: 1.3750 (weekly lows and daily trendline)
== SUMMARY ==
UK's "Freedom Day" (July 19 when all restrictions should be lifted by the government) could provide further support for the pound despite higher daily infection rates. The number of hospitalizations and fatal outcomes has been greatly reduced, and the majority of the UK population has covid antibodies, which supports my constructive outlook for the pair.
Pullbacks (like the one today) could be used to enter long in 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!
Leave me a comment on how you would trade the pair, and please hit "LIKE" and follow for more trade ideas like this. Thanks!
FUNDAMENTALS:
After reaching fresh 2-week highs on Friday, the GBPUSD pair fell sharply overnight as the US dollar firmed with higher UST yields. Markets remain cautious on GBP as the United Kingdom proceeds with their reopening plan, despite a surge in daily infections to around 31k. However, hospitalizations remain low, 90% of the UK population has covid-19 antibodies, and the country is also one of the leaders in vaccination rates. This supports my bullish bias in the currency for the week, assuming risk sentiment remains supportive and the USD continues to slide.
Latest Headlines:
USD News:
- US Dollar Index Price Analysis: Recovery targets 92.85
- US futures mixed ahead of North American trading
- Fed's Barkin: If labour market takes longer to recover, tapering goes a little later
- Fed's Barkin: Labor market hasn't healed enough to taper bond buying – WSJ
- US Dollar Index regains traction around 92.20
GBP News:
- GBP/USD: Sterling set to suffer as “Freedom Day” may be less free than earlier anticipated
- GBP/USD now targets 1.3900 and beyond – UOB
- GBP/USD retreats from two-week tops, flirts with session lows near 1.3885-80 area
- Pound Sterling Price News and Forecast: GBP/USD teases 1.3900 on softer USD, risk-on mood
- GBP/USD teases 1.3900 on softer USD, risk-on mood
- Pound Sterling Price News and Forecast: GBP/USD in a third week of declines? Delta, data and dollar
Upcoming Market Reports:
Here are the most important market reports for GBP/USD to follow in the coming days (all times are UTC timezone):
Tuesday at 12:30: USD CPI m/m (Expected: 0.5%, Previous: 0.6%)
Tuesday at 12:30: USD Core CPI m/m (Expected: 0.4%, Previous: 0.7%)
Tuesday at 17:01: USD 30-y Bond Auction (Expected: , Previous: 2.17|2.3)
Wednesday at 06:00: GBP CPI y/y (Expected: 2.2%, Previous: 2.1%)
Wednesday at 12:30: USD PPI m/m (Expected: 0.6%, Previous: 0.8%)
Wednesday at 12:30: USD Core PPI m/m (Expected: 0.4%, Previous: 0.7%)
Wednesday at 14:30: USD Crude Oil Inventories (Expected: , Previous: -6.9M)
Wednesday at 16:00: USD Fed Chair Powell Testifies (Expected: , Previous: )
Thursday at 10:00: GBP MPC Member Saunders Speaks (Expected: , Previous: )
Thursday at 12:30: USD Unemployment Claims (Expected: 350K, Previous: 373K)
Thursday at 12:30: USD Philly Fed Manufacturing Index (Expected: 27.8, Previous: 30.7)
Thursday at 13:15: USD Industrial Production m/m (Expected: 0.6%, Previous: 0.8%)
Thursday at 13:30: USD Fed Chair Powell Testifies (Expected: , Previous: )
Friday at 12:30: USD Retail Sales m/m (Expected: -0.5%, Previous: -1.3%)
Friday at 12:30: USD Core Retail Sales m/m (Expected: 0.4%, Previous: -0.7%)
Friday at 14:00: USD Prelim UoM Consumer Sentiment (Expected: 86.5, Previous: 86.4)
INTERMARKET:
Yields:
Yield differentials remain supportive for the pair due to the slide in US 2y yields over the last two weeks. This is a bullish sign for the pair.
SENTIMENT:
CoT:
The GBP is one of the rare majors that saw an increase in positioning against the USD in the last week (along with the JPY). Net long positioning in GBP rose to $1.9 billion, but it's worth noting that fast money has reached a 12-month extreme, which poses a downside risk for the pound.
Currency Strength Index:
GBP is slowly building its bull trend while the USD remains somewhat flat against other majors for the last 6 trading days. Today, risk-off supported the USD and JPY overnight, but the picture is changing ahead of the NY open, with risk currencies (and the pound) recovering some ground and the USD retreating from daily highs.
Risk Reversals:
While risk reversals are still skewed to the downside, it's worth noting that GBP call options are recovering vs similar out-of-the-money put options, signaling that investors are increasingly protecting against higer prices in the pound.
* Comment: In the FX market, risk reversals refer to the difference between the implied volatility of the most popular out-of-the-money calls and puts with the same expiration. Higher demand for an options contract increased its volatility and price. Therefore, a positive risk reversal signals that upside protection in the pair is relatively more expensive than downside protection, suggesting that investors are speculating on a rise in the currency.
TECHNICALS
Price-Action:
GBP/USD broke above a bearish trendline and reached fresh 2-week highs, were sellers pushed the price lower overnight. The pair is now finding support at the broken trendline, near the 50% Fib level of the latest bullish impulse move and a horizontal support area. The short-term trend is turning bullish, but 1.3830 (and 1.3815, the 61.8% Fib) need to hold for buying opportunities to emerge.
Pound pairs are famous for their deeper corrections, so the 61.8% Fib may be in play. However, risk tolerant traders may also use the 1.3830 level (which aligns with a horizontal support) to build their long positions.
It's also worth noting that today's (Monday) bear run is accompanied with decreasing volume, signaling that a turning point may be near.
Levels to follow (Liquidity):
Major resistance: 1.3909 (weekly high)
Minor support: 1.3815 (61.8% Fib)
Major support: 1.3750 (weekly lows and daily trendline)
== SUMMARY ==
UK's "Freedom Day" (July 19 when all restrictions should be lifted by the government) could provide further support for the pound despite higher daily infection rates. The number of hospitalizations and fatal outcomes has been greatly reduced, and the majority of the UK population has covid antibodies, which supports my constructive outlook for the pair.
Pullbacks (like the one today) could be used to enter long in 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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