British Pound: USD/GBP (GBP=X) continues to show strong volatility
GBP/USD continues to show strong volatility. The pair gained 1.0% last week, recovering most of the losses of the previous week. This week’s key events are GDP and wage growth. Here is an outlook for the highlights of the upcoming week and an updated technical analysis for GBP/USD.
There was plenty of drama in Parliament last week. The House of Commons and the House of Lords voted to pass a law to prevent a no-deal Brexit, which sets up a showdown with Prime Minister Johnson. The government is in disarray, as Johnson’s attempt to call a snap election for October was rejected by lawmakers.
In the U.K., all three PMI reports slowed in August, but this didn’t slow down the pound. Manufacturing PMI continues to point to contraction, dropping to 47.4. This was the weakest reading since 2012. Construction PMI fell to 45.0, the first contraction in five months. The news was slightly better from services PMI, which fell to 50.6, down from 51.4 in the previous release. This points to stagnation in the services sector.
Over in the U.S., the ISM manufacturing PMI slipped to 41.9 in August, down from 51.2 in July. It marked the first reading in contraction territory (below the 50-level) since August 2016. Unemployment data was a mix. Nonfarm payrolls slowed to 130 thousand in August, down from 164 thousand a month earlier. However, wage growth rose to 0.4% in August, its strongest gain of the year.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1.25.
The projected lower bound is: 1.21.
The projected closing price is: 1.23.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 22 white candles and 28 black candles for a net of 6 black candles.
An on-neck line occurred. This is a bearish pattern where prices should move lower when the white candlestick’s (i.e., the most recent) low is penetrated.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 85.4378. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 4 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 53.67. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 17 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 76. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 17 period(s) ago.
Rex Takasugi – TD Profile
FOREX GBP= closed down -0.000 at 1.228. Volume was 98% below average (consolidating) and Bollinger Bands were 12% narrower than normal.
Open High Low Close Volume___
1.227 1.228 1.226 1.228 2,782
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1.22 1.23 1.27
Volatility: 12 9 9
Volume: 113,127 116,146 150,982
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX GBP= is currently 3.7% below its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of GBP= at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GBP= and have had this outlook for the last 10 periods.
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