The pound was fairly unchanged during the below expected inflation data, which saw a reading of 1.8% compared to the forecast 1.9%, both below the Bank of England’s target of 2%.
Whilst both the prime minister and her European counterparts have said they don’t want to see the UK crash out of the European Union without a deal, not a lot of progress has been made to stop this scenario.
With this and the US-China trade war weighing heavy on the pound, it is no wonder GBP/USD ended Wednesday at the day lows.
The daily chart is showing no signs of stopping the decline of GBP/USD. The price action is showing a sideways market, with the high of 1.3174 on the 7th November being taken out and the low of 1.2698 on the 31st October also taken out. This suggests we should see consolidation, although consolidation on the daily can still have big moves if you compare the difference between the above highs and lows.
The next major level of support is 1.2696 and so expectation is that that level will be tested.
Secondary indicators confirm the notion that the support level will be tested as highlighted below.
- MACD – Cross of the MACD and signal lines offers a sell signal.
- Paraboli SAR – Has flipped above the market, again offering a sell signal.
There are always risks when trading GBP/USD given the current political climate but with only retails sale due out on Friday and some US data today, we could see this market easily hit that support level this week.
Look for any short term rallies to look to sell, identifying resistance zones, or should the market move quickly, a confirmation that the market is going to continue is a break of the lows, therefore placing a sell order below the lows will would also be a strategy.
Obvious resistance levels to sell would be:
- The daily pivot point at 1.2882
- The round number 1.2900
- The R1 pivot point at 1.2920
To sell GBP/USD, make sure to wait for triggers at these levels to signal entering the market.
Disclaimer: This should not be used as investment advice and is only an opinion. Do your own research before looking to risk your own capital in the financial markets.