GBP/USD: Time To Buy Consolidation
Meda Hoxha | Jul 27, 2016 08:33AM ET
The market seems to be digesting the latest 2Q GDP release, and it appears as if the better-than-expected data is easing the fears that have long dominated the market on UK's economy contraction. The key question was whether the economy was slowing down before the Brexit vote or not.
The pound is relatively unchanged against the dollar, even though UK's economy is growing at a higher pace than expected. GBP/USD has been isolated in a range for several days now and has oscillated between 1.3165- 1.3056, however we consider this a good sign for the moment as bears seem to have used their fuel.
On a more technical note, an inverse head-and-shoulders is completed, however bulls need more confirmation and a higher volume in order to break the neckline and possibly head towards 1.34.
GBP/USD H4 Chart - July 27, 2016
The most appealing factor in the above chart is divergence between AO and price action. Historical patterns reveal that whenever such divergence occurs, it does not take long for price to start reacting according to the indicator (good majority of samples).
Besides divergence, on the chart below it is clear GBP/USD is refusing to break 1.305 after trying multiple times. The best risk reward positioning for the time being is going long in current prices (1.31) with a stop loss at 1.306 and first target 1.315 at SMA 200. If that resistance breaks, we can aim for more up to 1.32 and the higher levels of the highlighted area.
GBP/USD M30 Chart - July 27, 2016
If this swing position goes as planned, we might later on aim for 1.34 before the real test on the upper trend line of the channel in the first chart.
*Enter with sizes smaller than usual due to FOMC, despite the fact that stop loss is small.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.