#EURUSD & #GBPUSD Weekly Forecast (23-29 July 2023)

#EURUSD

The EUR/USD went into the weekend near its lows, as the Forex pair showed a healthy dose of correlation to broad market conditions.

EUR/USD Remains within Higher Elements of Long-Term Price Range

The fast selling of the EUR/USD mirrored the broad Forex market, but the currency pair remains rather healthy and within the higher elements of its mid and long-term price ranges. Economic conditions are complex in the European Union where inflation and recessionary pressures are evident via data. The European Central Bank will issue its interest rate decision this coming Thursday, following Wednesday’s U.S Federal Reserve policy statement. Both the ECB and Fed are expected to raise their lending rates by 0.25% this week.

Day traders need to understand the likely interest rate hikes to come have been digested into the marketplace for the EUR/USD. What financial institutions and speculators now want to know is the outlooks of the ECB and Fed. On the surface in consideration of current economic conditions in Europe it appears the European Central Bank will have to remain more aggressive than the U.S Fed over the next six months. This perception could continue to lead to incremental buying of the EUR/USD over the mid-term. However, day traders need to take into consideration the daily gyrations which happen in Forex and understand the danger of reversals, like the selling which took place last week after a high was attained in the EUR/USD.

E.U PMI Data Tomorrow Might Create Volatility in the EUR/USD

• Purchasing Managers Index readings will come from Germany and France tomorrow; the outcomes could affect the EUR/USD.
• Traders should pay attention to the U.S Federal Reserve’s FOMC Statement this coming Wednesday. A more dovish-sounding U.S. Fed could spark buying in the EUR/USD.

EUR/USD Weekly Outlook:

The speculative price range for EUR/USD is 1.10975 to 1.13100

Traders should be very cautious early this week taking into consideration that the Fed and ECB will conduct their interest rate pronouncements on Wednesday and Thursday. The highs attained early last week show there remains a belief the EUR/USD has room to move higher, but the fast sell-off also shows that volatility exists as financial institutions aim for a balanced price. The EUR/USD near 1.11000 should be watched early this week to see if the support level can be sustained.

Tomorrow’s PMI readings from the E.U. may be a solid barometer regarding the direction of the EUR/USD. Day traders should understand most financial houses have priced in the interest rate hikes from the Fed and ECB that are likely to come. What large traders are nervous about is the rhetoric of the two central banks regarding their respective outlooks. The EUR/USD has incrementally climbed higher since early June. If current support levels hold, traders may start wagering on higher prices to develop.

Buying the EUR/USD is speculative, but the consideration may prove worthwhile for trading wagers. However, taking positions early this week need to have a full army of risk management prepared. If tomorrow’s PMI numbers from Germany are weaker than anticipated this could spur on momentary market volatility, but after this traders will likely start to position for Wednesday’s FOMC Statement which is sure to cause plenty of market action for the EUR/USD.

#GBPUSD:

After showing signs of wanting to challenge highs early last week, the GBP/USD began to sell off sharply and went into the weekend near lows.

GBP/USD Day Traders Must Deal with the U.S Federal Reserve this Week

The U.S. Federal Reserve will release its Federal Funds Rate decision this coming Wednesday and an increase of 0.25% is expected. However, the news that will shake Forex and the USD/GBP if the Fed raises interest rates as expected will be the FOMC Statement and its outlook. Economic data from the U.S. remains rather complex and financial institutions are concerned about what the U.S. central bank will do moving forward. Just last month when the Fed stopped their hikes, it was understood a July increase would likely happen. But traders remain uncertain about what will occur towards the end of this year.

The highs attained by the GBP/USD early last week challenged values seen on the 13th and 14th of July, but financial institutions may have overbought the currency pair momentarily. But the price velocity downwards in the GBP/USD may now be overdone, and speculators are likely looking at the currency pair and considering their short-term moves, they should take into account that Wednesday’s FOMC Statement from the U.S Fed will rattle the markets and cause volatility.

U.K Manufacturing and Services PMI Data on Monday is Coming

• Negative outcomes are expected from the Purchasing Managers Index readings from the U.K. tomorrow. The GBP/USD may move slightly after the reports are published.
• Inflation continues to be stubborn in the U.K and financial institutions are likely braced for a rather aggressive Bank of England, but shadows are causing concerns from the British housing sector which is under pressure regarding higher mortgages.

GBP/USD Weekly Outlook:

The speculative price range for GBP/USD is 1.27890 to 1.30875

Volatility has been strong in the GBP/USD the past two weeks with fast price changes and this has certainly tested day traders. Equilibrium is being sought by financial institutions as they gather evidence regarding their outlooks on the BoE and Federal Reserve. The Fed’s FOMC Statement will produce price velocity in the GBP/USD as reactions mount. If the Fed gently suggests that inflation in the States is looking better (declining) and that it may be able to take a wait-and-see approach regarding interest rates in the mid-term, this could help the GBP/USD create buying momentum.

As anticipated the GBP/USD has climbed back to its higher price range in the past couple of months which is within sight of historical norms. Traders may feel that any GBP/USD price realms below the 1.28000 level are overdone and this may attract buyers. If the GBP/USD does fall below 1.28000 and sustains ratios near 1.27900, this could catch a large segment of day traders off guard.

The GBP/USD needs solid risk management by traders in the days ahead and the fast results of the past two weeks in Forex have proven this point. Speculators looking for reversals higher should be very cautious until Wednesday’s results from the U.S Federal Reserve. Trading before the FOMC Statement should be quick-hitting, and stop loss and take profit orders should be working. Looking for higher prices seems like the correct consideration, but the GBP/USD can prove all short and near-term perceptions wrong and costly.

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