GBP/USD – What To Expect?
September 10, 2013 in Forex Analysis
The week started with positive note for both GBP/USD and EUR/USD. The strong positive correlation between these two currency pairs had gone haywire recently when EUR/USD fell while GBP/USD started moving up. This was expected to come to normal as we had indicated during the beginning of the last week.
This week started with a positive Sentix Investor Confidence report for Euro. The report indicated that the investors’ confidence rose in August to 6.5 from previous -4.9 while the consensus were for -2.8. Positive sentiments from Euro zone reflect in the strengths of both the euro as well as the British pound.
The claimant count data to be released from the U.K. on Wednesday is also expected to be positive. The change in the claimant count in in July indicated that there was a drop in the claimant count by 29.2K and the consensus are for further drop by 22K in August. Even though the expected drop is less than the July data but it would be a drop nevertheless.
Let’s see what the price action is indicating about the possible moves for GBP/USD?
GBP/USD price action during past 4 years
The above weekly chart of GBP/USD is showing the price action for almost past 4 years. The price action had been in a triangle formation till the second week of February 2013. The support had been coming at the lower trend line. Since GBP/USD had broken below that support, the previous support line seems to have become the resistance trend line. This fact was also mentioned in some old chart alerts including this GBP/USD chart alert posted 3 months back.
Now let’s have a close view of the above chart.
GBP/USD close view
The double bottoms shows above do not represent the ideal double bottom chart pattern but they indicate the failure of a drop below that support zone. Considering this fact and also the recent strong jump, there are good possibilities for further upward gains. We do expect a good resistance near 1.5751 but if the pair manages a break over 1.5751 then it should target the resistance zone of 1.5893 to 1.5940.
The possible trading strategies could be to have limit order for a long position near 1.5620 with a stop -loss at 1.5570 and another limit order near 1.5520 with a stop-loss just below 1.5460.
Caution: Please note that the U.S. Congress vote on the military action against Syria is scheduled for tomorrow i.e. September 11th and that may cause some unexpected volatility in the market.
Please share your opinions in the comment box below this post to discuss this further.