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Short-term Trading Idea FXGBP/USD Bear Speculation: Leaving the Channel

Trading opportunities on currency pair: last week the pound/dollar broke two supports. The risks of a break in the upper limit of the channel are still there. In this case, the pound will remain under pressure. The target zone is between 1.4646 and 1.4879. A closing of the candle above 1.5275 will cancel the scenario for a fall.

Aggressive UK pound sales have been caused by the publication of an inflation report for the country. The YouGov data shows that one-year expectations fell from 1.6% to 1.4%, and this might just lead to the Bank of England putting off an interest rate hike.

Real pressure on the pound came from a strong growth on the pound/dollar cross. The euro became a defense mechanism when the Asian and American stock markets were crumbling, so the currency was bought in every pair, including the euro/pound.

For the moment, we have the following parameters for the pound. The pound/dollar has broken the horizontal 1.5329 support (8th July, 2015 minimum). After Friday’s NFP report came out from the US, the pound/dollar broke the lower limit of the A channel. The market closed down on another horizontal support, 1.5169 (1st June minimum).

To further understand this idea, I recommend you take a look at the idea I’ve done on the euro/pound. The cross is having a significant effect on the pair, so I had to extend my analysis.

The ECB convened and the NFP came out positive, although August US job creation was set at 170,000 (+200,000 forecasted) and June and July’s values were reassessed upwards. US August unemployment was down by 0.2% to 5.1% (forecasted: 5.3%). The US August hourly wage index was up 0.3% (forecasted 0.2%, previous: 0.2%).

The dollar started to react to the report by falling, but then strengthened. After the payrolls on Monday, the key pairs will often move against their Friday movements. Plus, national holidays are ongoing in Canada and the US. Not much volume will be traded today. Monday could see a correction on dollar pairs.

If we take the euro/pound cross technical picture into account, one can suppose that a fall in the pound against the dollar will continue to the 1.4346-1.4879 support zone. The horizontal 1.4946 level is forming from a Match-April 2015 consolidation.

The euro/pound is trading at the upper limit of the canal on the weekly time frame (see euro/pound idea). It’s possible that we’ll see a depart upwards to 61.8% from the channel. The pound/dollar has already broken the A channel. This 61.8% from the channel passes through 1.4879. This will be the pound’s main target until the month ends.

If the Fed put its rate up when it convened on 16th-17th September, the target will be reached earlier. If not, this idea may become invalid. A close of the day higher than 1.5275 will cancel out the scenario for a fall. Once again, here you need to keep an eye on which candles start forming above 1.5275 before closing.

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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.

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