Overview of the GBP/USD pair. September 13th. The UK economy continues to disappoint traders
September 13, 2023 11:25 am
The GBP/USD currency pair also traded weakly on Monday, remaining below the moving average line. Therefore, the decline of the British currency may have temporarily halted, but it could resume at any moment since all indicators and factors still point to a downward trend. Yesterday, the British pound showed a slight increase against the European currency, but macroeconomic statistics from the UK needed to be more consistent and stronger. The unemployment rate increased, wages grew more than expected, and only jobless claims were positive as their number decreased by over 200,000. However, the data on jobless claims pertains to June, and it’s now September. More “current” unemployment data indicates that it is increasing.
Therefore, even yesterday, the British currency had little reason to rise. We have been saying for several months, at least, that there have been no reasons for the British pound to rise for a very long time. The market has been waiting for the Bank of England’s “ultra-hawkish” monetary policy for a long time, and it finally got it. But even this factor cannot push the pound up indefinitely. Sooner or later, the market must realize that the British regulator cannot keep raising the key rate indefinitely in the fight against inflation. The Chief Economist of the BOE, Huw Pill, is already talking not about additional tightening but about keeping the rate at its maximum level for an extended period. Andrew Bailey expects inflation to be around 5% by the end of the year but admits its acceleration in September. The BOE’s stance is beginning to weaken, along with it, the position of the British pound.
In the 24-hour timeframe, everything suggests that the pair’s decline should continue. All key lines have been breached, so the price must go down by another 200 points. Undoubtedly, when the Fed and Bank of England meetings are on the horizon, it is extremely difficult to make predictions. Still, we don’t even have technical signals for buying or a correction.
Monthly GDP data will be released in the UK in just an hour. We have already mentioned that these data have less weight in traders’ eyes than quarterly data. We see no point in examining various variations of the GDP indicator and believe that attention should be focused only on the month-on-month change, i.e., compared to July. According to forecasts, GDP is expected to contract by 0.2-0.3%, which can hardly be considered positive. If the actual value is slightly higher, the pound may rise in price, but the rally is unlikely to be strong. The same applies to industrial production, which may also decline in volume. Even if the forecasts are exceeded, we are unlikely to see a significant increase in the indicator. Therefore, the likelihood of the British pound strengthening on UK statistics is low.
What will be more important today is the same US inflation report, but it too could disappoint traders. For example, if its value matches the forecast of 3.6%, the market will have no compelling reason to take active action. In general, various scenarios are possible, and it is impossible to predict them in advance. Even if there is an upward correction today, we expect the British currency to resume its decline in the future.
The average volatility of the GBP/USD pair over the last five trading days is 77 points. For the pound/dollar pair, this value is considered “average.” Therefore, on Wednesday, September 13th, we expect movement within the range bounded by the levels 1.2411 and 1.2565. A reversal of the Heiken Ashi indicator downwards will signal a new phase of corrective movement.
Nearest support levels:
S1 – 1.2482
S2 – 1.2451
S3 – 1.2421
Nearest resistance levels:
R1 – 1.2512
R2 – 1.2543
R3 – 1.2573
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair declines gradually. Therefore, at this time, it is advisable to remain in short positions with targets at 1.2421 and 1.2411 until the Heiken Ashi indicator reverses upwards, but the movements are currently weak. Long positions can be considered after the price consolidates above the moving average line, with targets at 1.2583 and 1.2604.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, it indicates a strong trend.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel the pair is expected to trade over the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold zone (below -250) or overbought zone (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
The GBP/USD currency pair also traded weakly on Monday, remaining below the moving average line. Therefore, the decline of the British currency may have temporarily halted, but it could resume at any moment since all indicators and factors still point to a downward trend. Yesterday, the British pound showed a slight increase against the European currency, but macroeconomic statistics from the UK needed to be more consistent and stronger. The unemployment rate increased, wages grew more than expected, and only jobless claims were positive as their number decreased by over 200,000. However, the data on jobless claims pertains to June, and it’s now September. More “current” unemployment data indicates that it is increasing.
Therefore, even yesterday, the British currency had little reason to rise. We have been saying for several months, at least, that there have been no reasons for the British pound to rise for a very long time. The market has been waiting for the Bank of England’s “ultra-hawkish” monetary policy for a long time, and it finally got it. But even this factor cannot push the pound up indefinitely. Sooner or later, the market must realize that the British regulator cannot keep raising the key rate indefinitely in the fight against inflation. The Chief Economist of the BOE, Huw Pill, is already talking not about additional tightening but about keeping the rate at its maximum level for an extended period. Andrew Bailey expects inflation to be around 5% by the end of the year but admits its acceleration in September. The BOE’s stance is beginning to weaken, along with it, the position of the British pound.
In the 24-hour timeframe, everything suggests that the pair’s decline should continue. All key lines have been breached, so the price must go down by another 200 points. Undoubtedly, when the Fed and Bank of England meetings are on the horizon, it is extremely difficult to make predictions. Still, we don’t even have technical signals for buying or a correction.
Monthly GDP data will be released in the UK in just an hour. We have already mentioned that these data have less weight in traders’ eyes than quarterly data. We see no point in examining various variations of the GDP indicator and believe that attention should be focused only on the month-on-month change, i.e., compared to July. According to forecasts, GDP is expected to contract by 0.2-0.3%, which can hardly be considered positive. If the actual value is slightly higher, the pound may rise in price, but the rally is unlikely to be strong. The same applies to industrial production, which may also decline in volume. Even if the forecasts are exceeded, we are unlikely to see a significant increase in the indicator. Therefore, the likelihood of the British pound strengthening on UK statistics is low.
What will be more important today is the same US inflation report, but it too could disappoint traders. For example, if its value matches the forecast of 3.6%, the market will have no compelling reason to take active action. In general, various scenarios are possible, and it is impossible to predict them in advance. Even if there is an upward correction today, we expect the British currency to resume its decline in the future.
The average volatility of the GBP/USD pair over the last five trading days is 77 points. For the pound/dollar pair, this value is considered “average.” Therefore, on Wednesday, September 13th, we expect movement within the range bounded by the levels 1.2411 and 1.2565. A reversal of the Heiken Ashi indicator downwards will signal a new phase of corrective movement.
Nearest support levels:
S1 – 1.2482
S2 – 1.2451
S3 – 1.2421
Nearest resistance levels:
R1 – 1.2512
R2 – 1.2543
R3 – 1.2573
Trading recommendations:
In the 4-hour timeframe, the GBP/USD pair declines gradually. Therefore, at this time, it is advisable to remain in short positions with targets at 1.2421 and 1.2411 until the Heiken Ashi indicator reverses upwards, but the movements are currently weak. Long positions can be considered after the price consolidates above the moving average line, with targets at 1.2583 and 1.2604.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, it indicates a strong trend.
The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted.
Murray levels – target levels for movements and corrections.
Volatility levels (red lines) – the likely price channel the pair is expected to trade over the next day, based on current volatility indicators.
CCI indicator – its entry into the oversold zone (below -250) or overbought zone (above +250) indicates an approaching trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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