By IFCMarkets

Good afternoon, dear traders. One of the key events for today is the release of US Trade Balance (14:30 CET) and Manufacturing Production m/m in the UK (10:30 CET). Both indicators are released on a monthly basis. Indeed, the trade balance is the most expected one, which is a global economic indicator and is calculated based on the difference between exports and imports. The budget surplus (or a reduction in the deficit) is a favorable factor for the American currency growth.

The Industrial production index is a local index, and therefore it is less significant. However, it is considered to be a key indicator for the UK economy. The manufacturing industry, which makes up to 80% of the country’s industrial output, is based on high-tech solutions, and creates a high added value. These factors make it attractive for investment. Additionally, this sector is the most susceptible to consumer sentiment determined by unemployment and income. The release of both indicators can provide a further momentum for the GBP/USD, the 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 below. We can see that the British pound downtrend turning point is not observed: the trading volume increased, and that means we can expect a further decline. You can monitor trading volumes for this currency pair by clicking here.

We can see that the price broke the support line of the daily trend, and that may lead to decline acceleration, especially since the DonchianChannel lows are renewed. ParabolicSAR confirms the trend direction. RSI-Bars corrected above the level of 23.9%. It is recommended to wait for the downward breach of this level as the additional confirmation in the trend direction. A pending sell order can be opened below the fractal low at 1.67901, which is confirmed by the lower DonchianChannel boundary. Preliminary risk limitation is recommended to be placed above the new resistance at 1.72014. This level was confirmed by 3 Bill Williams fractals (!), and also by the ParabolicSAR and DonchianChannel historical values, and thus it can be considered as reliable.

There is a little possibility for the trend reversal due to unforeseen fundamental factors, such as unexpectedly high value of Manufacturing Production. In this case, a strong bullish momentum is quite possible: a long position can be opened above the resistance at 1.72014. This mark intersection may stand for the price reversal within the uptrend channel, with its simultaneous expansion. After one of the orders being executed, 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.

Market Analysis provided by IFCMarkets