GBP/USD Fundamental Analysis – week of April 30, 2018

The GBPUSD pair fell hard and fast during the course of trading last week as the dollar strength was pervasive all through the markets during the week and this pushed many of the other currencies lower. We had mentioned the impending weakness in the pound in our forecast last week and we saw the same during the trading during this period.

GBPUSD Crashes Lower

The pound had closed last week in a very weak manner though it was in the same week that it had managed to reach the range highs as well. The rejection of the range highs and the price action there indicated that there would be further weakness in the coming days. This was seen last week as the pound fell lower and more importantly, the fact that the pound fell through the 1.40 support region was the signal that the bears needed to sell off the pound.

The break through this support region was an indication that the control of the market had passed back to the bears and the traders acknowledged that by selling off the pound in a fast and quick manner. The weakness of the euro backed by some weak economic data from the Eurozone was further signal that the pound ought to be sold and this was the template that was followed for the rest of the week as the pair fell through the 1.38 region to close the week clearly on the backfoot.

The upcoming week presents a new month and the first week of the month brings in the usual set of PMI data from the UK in the form of construction, services and manufacturing PMI data. We are also likely to see a lot of month end currency flows which should impact the pound. We also have the employment data from the US which would be watched very closely due to the fact that the employment data had come in very weak in the previous month. If the data comes in stronger, then we should see the pound further weaken but we believe that for the short term, the GBPUSD pair would be caught between the 1.36 and the 1.38 regions.