Weekly Forecast

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GBP/USD Weekly Forecast (2nd May 2022 – 6th May 2022)

Apr 30, 2022 05:33


Fundamental view:

The British pound dropped against the greenback during the trading course of this week. The monetary policy divergence between the Fed and BOE is the major catalyst weighing on the pound. The greenback was the most sought-after currency with aggressive Fed rate hike expectations, with the CME’s FedWatch tool showing a 96.5% probability of a 50 bps rate hike in May and a 85% chance of a 50 bps June lift-off. The greenback also got attention as a safe haven asset due to worries of supply chain constraints caused by China’s covid outbreak and geopolitical tensions.

China’s covid lockdowns extended into Beijing while the Shanghai-reopening hopes faltered on a fresh uptick in infections and Europe battled an energy crisis, in the face of the Russia-Ukraine war. Moreover the dovish BOJ policy also underpinned the strength of US dollar.

In this week, US New Home Sales on 26th April and US Initial Jobless Claims on 28th April underpins bullish trend whereas US Core Durable Goods Orders monthly report on 26th April, UK Nationwide HPI monthly report and US Core PCE Price Index yearly report on 29th April underpins bearish trend for the pair.

The major economic events deciding the movement of the pair in the next week are US ISM Manufacturing PMI at May 02, UK S&P Global/CIPS Manufacturing PMI at May 03, US ADP Nonfarm Employment Change, US ISM Non-Manufacturing PMI, EIA Crude Oil Stocks Change, Fed Interest Rate Decision at May 04, BoE Interest Rate Decision at May 05 and Nonfarm Payrolls at May 06.

GBP/USD Weekly outlook:

Technical View:

 Last week’s high was 1.93% lower than the previous week. Maintaining high at 1.2838 and low at 1.2411 showed a movement of 427 pips.

In the upcoming week we expect GBP/USD to show a bearish trend. The currency pair is trading below the 200 Simple Moving Average and the MACD trades to the downside. Should 1.2373 proves to be unreliable support then the pair may fall further to 1.2179 and 1.1946 respectively whereas a solid breakout above 1.2800 will open a clear path upward to 1.3033 and then will further raise up to 1.3227. Chart formation of bearish flag pattern in H4 chart favors prospects of a bearish trend. Shooting star pattern formation escalates the expectation for a bearish trend.

Sell: 1.2565 target at 1.2181 and stop loss at 1.2805


Alternate Scenario
Buy: 1.2805 target at 1.3226 and stop loss at 1.2565
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