GBP/USD Fundamental Analysis – week of October 10, 2016 – Forecast

To say that this was a historic week for the pound would be an understatement. Many things happened to the GBPUSD pair over the past week and all these events together would make the past week as something that would go down in history as a week that broke the pound. The week started quietly for the pair but then the pair was always under pressure after comments from the UK PM May laying out the timeline for the actual Brexit process and hinting that the process and the negotiations would be a tough one.

This prolonged weakness led the pair to break through the Brexit low at 1.2790 and from that time, the market was jittery as the pair reached a 31 year old low and the traders were simply staring at an abyss below that. The feeling turned into panic towards the end of the week as the pair crashed 800 pips in a 5 minute period during late market hours. The blame for this was shared between algorithms, fat finger and statements from the Euro leaders but it did nothing to ease the panic in the pair. No one was sure what caused the fall but the damage had been done with huge losses accumulated by whatever bulls were left in the market.

Though the pair recovered most of its losses on Friday, the volatility seen on Friday suggested that the pair has not settled down yet. Looking ahead, for the coming week, it is suggested to traders to wait for a day or two before they even think of buying or selling in this pair.  There seems to be some support for this pair 1.2200 and the resistance for this pair is well defined at 1.2500 and those bravehearts out there who are adamant on trading this pair can use these range extremes to take trades with tight SL and a strong heart.

In the coming week, there is no major news from the UK for the whole of the week and there is the FOMC meeting minutes from the US that will be released and this could cause some volatility. But we believe that it will just be a rehash of what is already known and we dont expect any major changes. Be very careful while trading this pair in the coming week and the best advice would be for traders to stay out !