British Pound: USD/GBP (GBP=X) Pound Shrugs as U.K. Inflation Dips

British Pound: USD/GBP (GBP=X) Pound Shrugs as U.K. Inflation Dips

British Pound: USD/GBP (GBP=X) Pound Shrugs as U.K. Inflation Dips

Recent CPI releases have been around the 2.0% level, which is the Bank of England’s inflation target. However, August CPI slipped to 1.7%, down sharply from 2.1% a month ago. This release will likely raise concerns at the BoE, as it is the lowest level since December 2016. Core CPI also missed expectations and fell from 1.9% to 1.5%.

Fed Decision Looms

It looks like the Fed will lower rates at the upcoming policy meeting, which would mark back-to back rate cuts. If the Fed does press the rate trigger, the dollar could respond with losses across the board, which would push cable higher. Traders should also keep an eye on the rate statement – a dovish message from Fed policymakers could further weigh on the U.S. dollar.

Technical Analysis

GBP/USD managed to break above resistance at 1.2420 on Tuesday, after the pair posted strong gains. The pound is currently within striking distance of resistance at 1.2510 – the pair tested this line on Tuesday, but was unable to consolidate above it. This line is weak, and we could see the pound test it during the North American session. On the downside, 1.2380 has strengthened in support, with the pound moving to higher ground.

Technical Indicators

Overall, the bias in prices is: Sideways.

The projected upper bound is: 1.27.

The projected lower bound is: 1.23.

The projected closing price is: 1.25.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

A hammer occurred (a hammer has a long lower shadow and closes near the high). Hammers must appear after a significant decline or when prices are oversold to be valid. When this occurs, it usually indicates the formation of a support level and is thus considered a bullish pattern.

A hanging man occurred (a hanging man has a very long lower shadow and a small real body). This pattern can be bullish or bearish, depending on the trend. If it occurs during an uptrend (which appears to be the case with FOREX GBP=) it is called a hanging man line and signifies a reversal top. If it occurs during a downtrend it is called a bullish hammer.

A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).

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 Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 82.0335. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 2 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 63.64. 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 24 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 115.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 5 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 24 period(s) ago.

Rex Takasugi – TD Profile

FOREX GBP= closed up 0.000 at 1.250. Volume was 12% below average (neutral) and Bollinger Bands were 24% wider than normal.

Open     High      Low     Close     Volume___
1.250 1.251 1.244 1.250 109,524
Technical Outlook 
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1.24 1.23 1.27
Volatility: 10 10 9
Volume: 122,364 119,005 147,916

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.

Summary

FOREX GBP= is currently 1.8% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. 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 17 periods. The security price has set a new 14-period high while our momentum oscillator has not. This is a bearish divergence.

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