Technical Analysis GBPUSD : 2018-10-18

[IFC Markets]

Slowing inflation bearish for GBPUSD
UK inflation fell in September despite higher than expected wages and wholesale prices rise. Will the GBPUSD slide continue?

Recent UK data were weak on balance. Average weekly earnings in UK, excluding bonuses, grew 3.1% in the three months through August, the fastest pace of growth since early 2009. A steady growth of 2.9% was expected. However inflation data next day were weak: while wholesale prices gained more than expected the headline inflation slowed faster than expected, declining to 2.4% in September from 2.7% in previous month. At the same time labor market remained strong with unemployment unchanged at 4%, the lowest in 43 years. Slowing of inflation is bearish for GBPUSD.

On the daily timeframe GBPUSD: D1 is retreating after retracing to 3-week high in mid-October.

• The Parabolic indicator has formed a buy signal.
• The Donchian channel indicates no trend yet: it is flat.
• The MACD indicator gives a bearish signal: it is above the signal line and the gap is narrowing.
• The stochastic oscillator is falling but has not breached into the oversold zone yet.

We believe the bearish momentum will continue after the price breaches below the lower Donchian boundary at 1.3003. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the last fractal high at 1.3257. After placing the pending order the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (1.3257) without reaching the order (1.3003) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary


Position Sell
Sell Stop Below 1.3003
Stop loss Above 1.3257