Cable pulls back to key resistance
Cable pulls back to key resistance
Cable (GBP/USD) has been staircasing lower since mid-July and carving out a powerful downtrend on the 4hr candle chart (below).
A key characteristic of this downtrend has been repeated moves down into the lower Keltner channel followed by pullbacks to the 20-day exponential moving average (EMA).
Recent price action has seen cable break to new trend lows last week, pressing down into the lower Keltner channel. True to form, this has been followed by a steady pullback towards the 20-day EMA – an area that coincides with a key area of horizontal resistance.
GBP/USD 4hr Candle Chart
If we zoom in and analyse this week’s price action in more detail (see chart below), we can see that cable formed a bearish pin-bar candle at resistance during yesterday’s session. This price action signals that the market may be starting to succumb to the dominant downtrend.
GBP/USD 4hr Candle Chart Zoomed View
Risk management
Traders looking to trade this pullback could place stops either above yesterday’s pin-bar high, or above the upper Keltner channel on the 4hr chart. For targets, a retest of last week’s lows looks to be logical initial target while secondary targets could be as low as the May swing lows.
In terms of newsflow, this morning’s UK economic data revealed that UK wages in the three months to July grew at their fastest pace on record, with average pay, excluding bonuses, rising by 7.8%, the highest rate since 2001. Total pay, including one-off payments to NHS workers and civil servants, increased by 8.5%, outpacing inflation. This raises concerns for the Bank of England about inflation despite a weaker job market.
Tomorrow’s UK GDP data and U.S. inflation data have the potential to cause outsized volalitty for this currency pair.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
Cable (GBP/USD) has been staircasing lower since mid-July and carving out a powerful downtrend on the 4hr candle chart (below).
A key characteristic of this downtrend has been repeated moves down into the lower Keltner channel followed by pullbacks to the 20-day exponential moving average (EMA).
Recent price action has seen cable break to new trend lows last week, pressing down into the lower Keltner channel. True to form, this has been followed by a steady pullback towards the 20-day EMA – an area that coincides with a key area of horizontal resistance.
GBP/USD 4hr Candle Chart
If we zoom in and analyse this week’s price action in more detail (see chart below), we can see that cable formed a bearish pin-bar candle at resistance during yesterday’s session. This price action signals that the market may be starting to succumb to the dominant downtrend.
GBP/USD 4hr Candle Chart Zoomed View
Risk management
Traders looking to trade this pullback could place stops either above yesterday’s pin-bar high, or above the upper Keltner channel on the 4hr chart. For targets, a retest of last week’s lows looks to be logical initial target while secondary targets could be as low as the May swing lows.
In terms of newsflow, this morning’s UK economic data revealed that UK wages in the three months to July grew at their fastest pace on record, with average pay, excluding bonuses, rising by 7.8%, the highest rate since 2001. Total pay, including one-off payments to NHS workers and civil servants, increased by 8.5%, outpacing inflation. This raises concerns for the Bank of England about inflation despite a weaker job market.
Tomorrow’s UK GDP data and U.S. inflation data have the potential to cause outsized volalitty for this currency pair.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
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