GBP/USD stuck at 1.31 for the week?

Sterling seems destined to remain close to the 1.31 level in its pair with the dollar at the moment.

In some ways, this is good news for the pound.

It has suffered significantly in recent months thanks to Brexit and the coronavirus pandemic, and the 1.31 area represents something of a recovery for it.

However, away from long-term views, it is perhaps unsurprising that it is now surging against the dollar.

The latter currency has suffered from serious political gridlock in the US recently, and it has declined overall in most of its major pairs in the last few weeks.

According to some strategists, the pound is now beginning to look overbought in this pair.

The Relative Strength Index (RSI) measures the extent to which a currency may be oversold.

By this metric, the GBP/USD pair is currently at 79.9.

This development led some analysts to suggest that the pound’s recent resurgence is unlikely to be replicated in the short term.

One key factor in the pound’s performance against the dollar over the next few days is likely to be any further news from the US regarding the health of the increasingly fragile economy there.

The US currency is facing a number of external events on that front.

The normal week-on-week jobless figures will be out on Thursday at 12:30pm GMT.

Initial jobless claims for the dates around 31^st July will be out, and are expected to show a slight reduction from 1,434,000 to 1,415,000.

If this transpires, it is likely to be welcomed by dollar traders, who might interpret it as a sign that the labour market is getting back onto its feet following the coronavirus pandemic.

Continuing jobless claims for the previous week are also forecast to show a drop.

This time, the drop is expected to be from just over 17,000,000 to 16,839,000.

It will be out in the same time slot of 12:30pm GMT.

Looking to next week, meanwhile, the US dollar will be back in the spotlight when producer price index details for July come out at 12:30pm GMT.

These are set to show a year-on-year change from -0.8% to -0.3% on a year-on-year basis.

On a month-on-month basis, meanwhile, it is expected that the index will go back into positive territory.

It is forecast to go from -0.2% to +0.3%.

Consumer price index figures, meanwhile, are expected on Wednesday.

These will be out in the 12:30pm GMT time slot and are forecast to show a year-on-year rise for July from 0.6% to 0.8%.

Month on month, meanwhile, they are set to go from 0.6% to 0.3%.

Another metric out of the US on Wednesday is also likely to be monitored.

The EIA crude oil stocks change data no doubt will be observed given the recent volatility of the price of oil.

About the author: Justin Freeman

Justin is an active trader with more than 20-years’ industry experience of working for big banks and hedge funds. He has an inside knowledge of how the financial markets work, thanks to roles including trader on a $750m Event-Arbitrage desk and CRO and COO of hedge funds running a variety of strategies. From stat-arb and trend-following CTA to fixed-income relative value. Firm’s he has worked at include big banks like Citi, and prominent hedge funds including D. E. Shaw and Millennium Capital Management.

Share

Tweet

Safest Forex Brokers 2024

	Broker	Info	Best In	Customer Satisfaction Score
#1	73% of retail CFD accounts lose money. Founded: 2014	Global Forex & CFD Broker	Best Trading Conditions Visit broker	4.9
#2	Your capital is at risk Founded: 2014	Global Forex Broker	BEST SPREADS Visit broker	4.8
#3	Your capital is at risk Founded: 2006	Globally regulated broker	BEST CUSTOMER SUPPORT Visit broker	4.9
#4	81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money. Founded: 2008	Global CFD Provider	Best Trading App Visit broker	5
#5	Between 74-89 % of retail investor accounts lose money when trading CFDs Founded: 2010	Global Forex Broker	Low minimum deposit Visit broker	4.9
#6	76% of CFD traders lose money Founded: 2007	Global CFD & FX Broker	ALL-INCLUSIVE TRADING PLATFORM Visit broker	4.9
#7	Your capital is at risk Founded: 2009, 2015 and 2017	Global Forex Broker	Low minimum deposit Visit broker	5
#8	Your capital is at risk Founded: 2006	CFD and Cryptocurrency Broker	CFD and Cryptocurrency Visit broker

Forex Fraud Certified Brokers

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.