The forex market will be in the spotlight this week as investors reflect on last week’s crucial central bank and fiscal events. GBP/USD price crashed to an all-time low on Monday while the EUR/USD plummeted following Italy’s election. So, here are the weekly forex forecasts for key currency pairs.
GBP/USD forecast: to hit parity?
The GBP/USD price continued plummeting on Monday morning as the outlook of the UK economy dimmed. It crashed to a record low of 1.0370, meaning that it has fallen by more than 20% this year. This crash happened after the UK government unveiled a series of tax cuts, which dampened the mood of the economy.
Some analysts are now comparing the UK to be an emerging market, which is remarkable considering that the country used to be a superpower a few decades ago. On the daily chart, we see that the GBP/USD pair has crashed below all moving averages while the MACD has plunged to the lowest level this year. The Relative Strength Index has also moved to the overbought level.
Therefore, the GBP to USD pair will likely continue falling this week. In the worst-case scenario, it could hit parity with the US dollar. However, a brief relief rally cannot be ruled out in the near term as some investors buy the dip.
The GBP/ZAR price plunged to the lowest level since 2020 as concerns for the South African economy and UK worsened. In South Africa, Eskom warned that it will continue with its power cuts this week. Therefore, analysts expect that the situation will worsen. Still, the pair’s price action implies that analysts expect that the UK economy is in a worse shape than South Africa.
On the weekly chart, the pair crashed below all moving averages while the MACD moved below the neutral level. It has also formed a head and shoulders pattern, which is usually a bearish sign.
Therefore, the pair will likely continue falling as sellers target the next key support level at 18. A move above the resistance level at 19.50 will invalidate the bearish view.
Like the GBP/USD pair, the GBP/AUD crashed to the lowest level since September 2017 as the outlook of the UK economy dimmed. On the monthly chart, the pair managed to move below the important support level at 1.7395, which was the lowest level in November 2020. It has moved below all moving averages.
And like the GBP/ZAR, it has also formed a head and shoulders pattern while the MACD has moved below the neutral level. The pair will likely continue falling as sellers target the next key support level at 1.500. A move above the resistance at 1.7395 will invalidate the bearish view.
The GBP/USD pair is not the only one that has crashed. The EUR/USD price plummeted as the US dollar index (DXY) soared to $113. This happened after Italy elected a far-right candidate to replace Mario Draghi, who was a respected prime minister.
On the monthly chart, the GBP/USD pair has continued its downward trend and moved below all moving averages. The MACD and the RSI have all continued plummeting. Therefore, the pair will likely continue falling as the US dollar index surges.
The GBP/CHF also continued falling on Monday morning as the pound sterling crash accelerated. This happened amid divergence views between the SNB and the BoE. It has moved below all trend indicators like the moving averages and Bollinger bands. The pair will likely continue falling as sellers target the next key support level at 0.9600. A move above the resistance level at 1.100.