Will the British Pound rebound? – Paxforex

The British Pound has lost a lot of ground over the past few trading weeks as forex traders decided to take profits after a strong rally. The rally in the British Pound which lasted several months was primarily fueled by hopes of an increase in interest rates by the Bank of England’s Monetary Policy Committee which many expected to occur during 2014. The first-half of this year continued to power the British Pound ahead on the back of strong economic output and labor market growth.

As the second-part of the year unfolded a series of much weaker economic reports have given forex traders enough reason to take profits and sell the British Pound while short-seller have plowed into this overbought currency and helped accelerate the move away from multi-month highs. Anticipation for a 2014 rate hike was killed last week with a very disappointing labor report while minutes from the Bank of England’s last policy meeting cooled the selling pressure marginally.

It appears as all the bad news are out for the British Pound, at least for now, and that the British currency will be able to form a bottom below 1.6575. Yesterday’s economic data showed a much stronger reading on retail sales which excluded the sales of the volatile automotive sector which rose to 0.5% in July. The UK government also posted a much smaller monthly deficit than expected.

Next week will be a crucial trading week for the British Pound with no major economic news set to be announced during the trading week out of the United Kingdom. This will allow trading to take place purely on a technical level when it comes to the British Pound. Forex traders need to be aware of economic news releases which will affect the second pair of all British Pound crosses.

Forex traders should expect the British Pound to see a decrease in volume on down-days as this currency tries to create a bottom from where price action may be able to reverse some of the heavy losses faced over the past few trading weeks. Forex traders may realize their floating trading profits and start to cover short-positions which will further provide fuel to a rally.

Written by Paxforex