Technical Analysis GBPUSD : 2014-08-19


Good afternoon, dear traders. The key event for today is the release of Core CPI, the UK (10:30 CET). This indicator expresses the percentage change in the price of products and services. Core CPI is published by the Office for National Statistics, except for volatile components such as food products and electricity. The index is considered to be an inflation indicator, which is released by the Bank of England, considering the base rate change and, therefore, this index represents a certain interest for investors. It is important to note that the data is published in annual terms (!), and allows defining long-term trends. That is why, today the Core CPI is of the greatest importance for market makers: banks, investment funds, etc… The publication of this index may provide a further momentum for the GBP/USD currency pair, which we are considering today on the daily chart.

The daily volumes of futures and options traded on the Chicago Mercantile Exchange are presented on the chart above. We can see that the volumes are located near the historical low of 50,000 contracts. It means that at the moment there is no trend observed, and we can talk with confidence about a new trend only after updating the trade volume high. You can monitor trading volumes for this currency pair by clicking here.

GBP/USD

Let us consider the daily price chart. We can see that there was the destruction of the weekly trend, and now the price forms the bearish trend on the daily timeframe. DonchianChannel lows are being updated, ParabolicSAR confirms the trend. Its values are moving along the daily trend line. There is no contradiction on the part of RSI-Bars, which was corrected above the support at 19.8032%. For more confidence in the movement direction it is recommended to wait for the downward breach of this mark. Pending sell order can be opened below the price fractal low at 1.66622, which is confirmed by the lower boundary of the DonchianChannel. It is recommended to place the preliminary risk limitation above the new resistance at 1.68516. This level was confirmed by Bill Williams fractal and ParabolicSAR historical values. A bearish position is marked by the dotted line on the chart (red line - stop loss, green line – the opened sell order), the position opened by the author during his holidays. At the moment, the profit is increasing, and soon it will be possible to move the Trailing Stop to the next peak - to the breakeven point.

Little probable, but possible the trend to reverse, due to unforeseen fundamental factors, such as unexpectedly high values of Core CPI. In this case, a strong bullish momentum is possible to happen: a long position is to be opened only above the resistance at 1.68516. This mark intersection would mean the price reversal within the limits of the weekly growing trend channel with its simultaneous expansion. After position opening, Trailing Stop is to be moved after the ParabolicSAR values, near the next fractal trough (long position), or peak (short position). Thus, we are changing the probable profit/loss ratio to the breakeven point. As soon as the breakeven point is achieved, the opposite order is to be closed.

PositionSell
Sell stopbelow 1.66622
Stop lossabove 1.68516

PositionBuy
Buy stopabove 1.68516
Stop lossbelow 1.66622

Dear traders. You can look through the detailed report of author's account here.

Note

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