We will be tracking some of the major currency pairs on a regular basis. One of these include GBPUSD. The economic calendar looks loaded with UK and Eurozone Consumer Price Index (CPI) and Purchasing Price Index (PPI) data expected to come out later today. The inflation measures/numbers for these regions will have an impact on region's currencies vs the US Dollar (GBPUSD and EURUSD). Combining these data releases with the technical price action can help understand the potential moves and thus devise trading strategy. We look at the Daily and 4H charts for GBPUSD charts here.
On the Daily Trading Chart, the pound has just completed a near perfect XABCD butterfly pattern. Post the CD bull leg indicating completion of the last leg of XABCD, the expected next move was a reversal which is what we saw from around 1.2500 as indicated by past 3 daily bearish candles. This downward trend, as suggested by the daily chart, is likely to continue further taking us through rest of the week.
Intra-day, British Pound is traversing within a narrow upward channel and at the current price of 1.2405 (writing of this Trading Idea article) has hit bottom of the channel. We should see a reversal northwards soon from the current levels, so a possible long on 4H at current price. A recent green candle sort of confirms the reversal, inspite of the fact that the lower channel line is not exactly parallel at this stage to the upper one, indicating a further bearish candle is feasible.
Cumulatively looking at the Daily and Hourly chart, the short term outlook for GBPUSD remains bearish.
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Trade Setup (Original)
Long on 4H
Target 1: 1.2503
Target 2: 1.2600
Update 1: Target 1 Hit. Booked profit on 50% trade,
Stop moved to Entry
Update 2: Stop for the remainder 50% position moved to 1.2431
Update 3 (Sept 23): Trade closed at Stop
Sterling opens week with a reversal, parallel channel broken. #GBPUSD