GBPUSD: Forex Technical Analysis – Rising inflation supports British Pound

By IFCMarkets

Rising inflation supports British Pound

UK inflation rose 2.9% in August, above expected 2.8% gain. Will the British Pound continue strengthening?

The UK recent inflation report was upbeat: consumer prices rose 2.9% on year in August when a 2.8% gain was expected following 2.6% advance in July. The next day Office of Statistics data showed unemployment in three months to July fell to 4.3% from 4.4% but wage growth remained steady at 2.1% over year. While the Bank of England is widely expected to leave its key interest rate at 0.25% at its meeting today, leaving unchanged also the size of its asset purchase program at £435 billion, there is a chance the number of dissenting votes could rise to three from a 7-2 split in favor of keeping rates on hold and the central bank may strike a hawkish tone in light of rising inflation.

On the daily chart the GBPUSD: D1 is above the 200-day moving average MA(200).

• The Parabolic indicator gives a buy signal.
• The Donchian channel indicates an uptrend, it is tilted up.
• The MACD indicator is above the signal line and the gap is widening, which is a bullish signal.
• The stochastic oscillator has fallen back from the overbought zone.

We believe the bullish movement will continue after the price breaches above the upper Donchian boundary at 1.3328. It can be used as an entry point for a pending order to buy. The stop loss can be placed below the fractal low at 1.2851. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (1.2851) without reaching the order (1.3328) we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

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