By IFCMarkets

Weaker UK data bearish for GBPUSD

UK construction and services sectors’ expansion slowed more than expected in September. Will the GBPUSD slide continue?

Recent UK data were weak: services sector expansion slowed more than expected as evidenced by decline of Markit’s Services PMI to 53.9 in September from 54.3 when a reading of 54 was forecast. Construction sector expansion slowing was more rapid than expected as Construction PMI fell from 52.9 to 52.1 when a reading of 52.5 was expected. Another weak datapoint was the reduction in new car sales in September by 20.5% over the same period a year ago. Weaker UK data are bearish for GBPUSD.

On the daily timeframe GBPUSD: D1 is retreating after retracing to 3-month high two weeks ago. It is testing the 50-day average MA(50).

• The Parabolic indicator has formed a sell 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 rising but has not reached the overbought zone.

We believe the bearish momentum will continue after the price breaches below the lower Donchian boundary at 1.2921. 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 1.3297. 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 (1.3297) without reaching the order (1.2921) we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

Market Analysis provided by IFCMarkets