GBP/USD Price Forecast for Q3 – Q4
Should we be concerned about the Pound/Dollar price? Absolutely. Even if one does not reside in either of those nations, economics affects every single person on the planet. Since the start of the year, the Pound has fallen over 10% to the Dollar. Will this be the same for quarters three and four?
This is the question on everyone’s lips as forecasters are looking at the currency pair and what we can expect for the rest of the year. Strap on those boots because you are going to want to know what the Pound/Dollar price looks like for the rest of 2022 and what it means to you, whether you are involved in forex trading, investing, or traditional trading, etc.
Firstly, what is the fuss about this currency pair?
What is making everyone show so much interest in the GBP/USD pair? For starters, this currency pair is the forex ticker, which shows the value of the Pound against the Dollar. It also tells traders how many Dollars they will need to buy one Pound. This currency pair is the most well-known and widely traded pair in the world. So, understand that the forecast for this currency pair is highly important.
Bottoming formation
Before we dive into bottoming formation or stock bottom for the pair, let’s first understand what it is. So, you get a bottom price, and this is the lowest traded price on a bowl formation. This is not enough for stock prices to fall, and this is because stock bottom formation needs new buyers to reverse a bearish trend.
There’s been much speculation that potential bottoming formation is on the cards since GBP/USD is down (not out) as bullish patterns begin to emerge. Since May, we’ve seen with each new low that the cable has been working on a wedge formation. Furthermore, we could see a top side move of epic proportions if this trend continues.
Why are these trends the way they are currently? Well, the patterns show us that there is both a contraction in volatility as well as a reversal in the trend that catches the market. What we are not seeing is that it doesn’t always trigger the opposite direction of the trend and may go in the direction of an extended trend.
How does the currency pair get to the top side again? To trigger the pattern on the topside, the price needs to rise above the top-side trend-line of the pattern. Essentially, for GBP/USD to both be above the top-side trend-line, the crossing must be at 12 056. Much has remained the same since February, but the first line of resistance came just recently in June when the crossing was high at 12 406. On the opposite end, if there is an increase in acceleration, we might see a reversal quickly unfold. Economists warn that fishing for a bottom on the downside scenario can be dangerous, however, a conservative approach is to wait for the reversal to develop and see the price take out of the top-side trend-line of the pattern before turning bullish.
GBP outlook
For the first and second quarters of the year, the Bank of England was in a sticky situation. This was largely due to soaring inflation which is anticipated to rise even further, with a recession on the cards too. The growth outlook is slightly grim, with inflation now well over 9% and the Bank of England forecasting that it will soon head into double digits. Currently, the Pound is under pressure due to the political climate, but it’s not all doom and gloom.
USD outlook
The British are not the only ones facing tough economic times; the US is in a similar position. In the first quarter, the US was relatively stable, but from the second quarter, we saw a rise in interest rates and inflation, something that will challenge the US in the coming months.
While the Pound looked quite poor against the Dollar, if looked at in isolation, on the other hand, the cable was down around 10 big figures since the start of quarter two. But the Pound has been hammered by the Dollar since last year. In fact, the Pound’s exchange rate index was flat in the past year, and this was good for the Dollar since it highlighted its strength.
In closing, MUFG Bank predicts the following GBP/USD price:
- Q3: 1.06
- Q4: 1.10
