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Pound price forecast 30 September 2021 | GBPUSD Fundamental analysis


In the middle of summer, the GBPUSD bulls were ambitious about reaching level 1.45, but at the end of September they pray that the pair would not fall to level 1.3. What is the reason for the pound’s collapse? Let us discuss the market outlook and make up a trading plan.

Weekly pound fundamental forecast

The marketplace is where dreams come true and hopes are shattered. The most serious moves tend to happen when investors get rid of their illusions by selling an asset that they previously bought with renewed vigor. On the eve of the September meeting of the Bank of England, hedge funds expecting a hawkish surprise have increased pound longs at the fastest pace in two years. Nevertheless, the understanding that the BoE is not able to solve all the problems of the UK economy made the GBPUSD bulls retreat. As a result, the pair fell to the December bottom, having lost all gains since the beginning of the year.

Dynamics of pound longs

Source: Bloomberg.

Recently, the pound encouraged by rapid vaccinations, the booming UK economy after its opening and hopes of a higher interest rate, was among the G10 leaders. In early June, the GBPUSD price reached its highest level in more than three years. However, first, the Fed’s hawkish shift, and then the problems of the UK economy, knocked out the bulls. In September, the pair sank by more than 2%, marking the worst 2-day dynamics in the last 12 months. The volatility of the sterling is the highest among the G10, for which it is often jokingly called the Great British Peso, comparing it with the currency of a developing country. At the same time, the collapse of US stock indices contributes to the GBPUSD fall.

Pound volatility dynamics 

Source: Bloomberg.

Despite the fact that all MPC members are ready to vote for a rate hike this year to combat high inflation, investors are well aware of how difficult the task is facing the central bank. The BoE head notes that the regulator is not able to solve problems with supply chains and warns that the recovery of the UK economy to pre-pandemic levels is likely to occur as early as 2022, several months later than originally planned.

The United Kingdom, as well as the whole of Europe, is threatened with an energy crisis. However, in the UK, the problem is more acute due to labor shortages associated with Brexit and is fraught with a serious GDP slowdown. At the same time, the rise in gas prices to record peaks and oil prices to 3-year highs exacerbate the risks of excessive inflation. According to Credit Agricole the best strategy for hedging stagflation the UK is facing, is to sell GBPUSD.

Weekly GBPUSD trading plan

The money markets may be 100% confident that BoE will raise the interest rate in February and 60% that it will happen in December, but in reality, the central bank may step back from its intentions so as not to slow down the economy. As a result, some investors rushed to sell the pound. We are reaping the benefits of successful GBPUSD sales when the price rebounds from resistances at 1.3725 and 1.3675. The inability of the pair to overcome the support at 1.3415 is a reason to fix part of profit. On the contrary, a successful breakout will give reason to add up to short trades.

    

Price chart of GBPUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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