Wed. Dec 8th, 2021

GBP / USD may have a volatility shake this week with upcoming top-tier economic updates from the US and UK

Will we see a break from recent consolidation and a new impetus?

GBP / USD Bearish Break?

4-hour GBP / USD currency chart
4-hour GBP / USD currency chart

Last week, my good friend Big Pippin pointed to a formation of potential triangles in the one-hour chart works, suggesting the potential for a bearish break in GBP / USD possibly soon.

Looking at the four-hour chart today, it looks like we’ve received one more bounce since its release, and now it looks like the 1.3900 support area could finally be breaking. Will we finally see the technical operators lower the pair?

Possibly, but we have to keep in mind that there are top-tier economic data for the US dollar, especially the most recent data from the consumer price index. Inflation has been a topic and a market boost this year, and if current expectations of a possible reversal of the high price growth rates we have seen disappear, the green dollar could take a bearish turn this week.

We also have the latest quarterly update of UK GDP on August 12 to potentially shake the British pound. Since this is a delayed indicator of fundamental health, it is unlikely to be a big market driver without reading a distant surprise.

Expectations are up 4.8% in the second quarter, so anything close is likely to provoke a reaction from currency traders.

We will be looking at these two events this week for a potential GBP / USD setup. If the US CPI reaches above the 0.5% read for July, this could be enough to cause traders to trade in expectations of a previous rate hike / reduction of the US dollar.

In this scenario, the bearish break of the GBP / USD above has higher chances of success, with a potential to fall to the control of 1.3700 given its weekly ATR of about 180 pips combined with a bearish reading of UK GDP.

Conversely, if U.S. inflation falls below the 0.5% read, it would likely attract sellers in U.S. dollars who could reduce their rate-raising bets or profit from the small concentration in U.S. dollars since from the beginning of August. The odds of the pair falling back to 1.4000 this week are set to rise sharply if the UK’s GDP surprises with a strong positive reading.

What do you think? Will the bearish price action attract more bears? Will the latest data on inflation be the main catalyst for the pair?

Let me know in the comments below and, as always, remember to never risk more than 1% of a trading account in any transaction. Adjust the position sizes accordingly. Create your own ideas and don’t just follow what I do.

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