Overview of the GBP/USD pair. September 14th. The US inflation report left the market puzzled
September 14, 2023 11:22 am
On Wednesday, the GBP/USD currency pair showed no interest in active movements. While the EUR/USD pair was primarily focused on the US inflation report yesterday, the GBP/USD pair could also pay attention to British statistics, which have been released for the second consecutive day. However, if the British pound had been aiming for an upward correction, these dreams would have failed to come true because, once again, British statistics disappointed. GDP in July fell more than expected, and industrial production lost more than the market expected. Thus, two reports out of two put pressure on the British pound.
Where did this lead? Only to the fact that the pair once again dropped to the Murray level of “0/8”-1.2451, which can be considered a local support level at the moment. Since it was not overcome again, an upward correction is still relevant. However, it should be noted that bulls are not eager to buy now, and bears are keen on profiting from short positions. All of this points to the fact that the decline of the British pound could resume any moment. The market may be waiting for the Bank of England and the Federal Reserve meetings next week, as these regulators also have several important questions to address. But we believe that the decline of the British pound will continue almost regardless, as it has risen for too long and too strongly.
All indicators in the 4-hour timeframe are pointing down. In the 24-hour timeframe, the pair has settled below the Ichimoku cloud. The price cannot even firmly stay above the moving average and make a slight upward correction. Therefore, there is no signal for buying or even for a correction. Volatility is low – only 71 points. Today, the outcome of the ECB meeting may affect the British pound, but first, it needs to impact the euro, which has also been stagnant for the past five days.
It’s time to take a closer look at the US inflation report, which traders have eagerly awaited, and it seems that it was all in vain. At least, based on the movements of both currency pairs yesterday, it can be said that the market did not understand what the numbers meant. The Consumer Price Index accelerated to 3.7% y/y in August, which is undoubtedly bad. Bad for the US economy, but not for the dollar, as the Fed is now guaranteed to raise the rate at least one more time this year. And maybe even twice. Maybe even in September.
However, at the same time, the core inflation rate dropped to 4.3%, as experts had predicted. So, inflation slowed down, but core inflation increased. And what decision the Fed will make on the interest rate next week has become less clear. The American regulator may leave the rate unchanged against the backdrop of a decline in core inflation or raise it unexpectedly due to rising core inflation. The market is now in complete stagnation and needs help understanding what to expect and what to do. There are just as many unanswered questions in the situations with the Bank of England and the ECB. Thus, we wait and observe the development of the situation.
The average volatility of the GBP/USD pair over the past five trading days is 71 pips. For the pound/dollar pair, this value is considered “average.” Therefore, on Thursday, September 14th, we expect movement within the range limited by the levels of 1.2430 and 1.2572. A downward reversal of the Heiken Ashi indicator will signal a new attempt to resume the downward 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:
The GBP/USD pair in the 4-hour timeframe continues to hover near its local lows. Therefore, at the moment, you can stay in short positions with targets at 1.2430 and 1.2421 until the price firmly closes above the moving average. However, the movements are currently weak. Long positions can be considered after the price firmly closes above the moving average line, with targets at 1.2573 and 1.2604.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, the trend is currently strong.
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 in which the pair will move the next day, based on current volatility indicators.
CCI indicator – its entry into the overbought zone (above +250) or oversold zone (below -250) indicates a potential trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
On Wednesday, the GBP/USD currency pair showed no interest in active movements. While the EUR/USD pair was primarily focused on the US inflation report yesterday, the GBP/USD pair could also pay attention to British statistics, which have been released for the second consecutive day. However, if the British pound had been aiming for an upward correction, these dreams would have failed to come true because, once again, British statistics disappointed. GDP in July fell more than expected, and industrial production lost more than the market expected. Thus, two reports out of two put pressure on the British pound.
Where did this lead? Only to the fact that the pair once again dropped to the Murray level of “0/8”-1.2451, which can be considered a local support level at the moment. Since it was not overcome again, an upward correction is still relevant. However, it should be noted that bulls are not eager to buy now, and bears are keen on profiting from short positions. All of this points to the fact that the decline of the British pound could resume any moment. The market may be waiting for the Bank of England and the Federal Reserve meetings next week, as these regulators also have several important questions to address. But we believe that the decline of the British pound will continue almost regardless, as it has risen for too long and too strongly.
All indicators in the 4-hour timeframe are pointing down. In the 24-hour timeframe, the pair has settled below the Ichimoku cloud. The price cannot even firmly stay above the moving average and make a slight upward correction. Therefore, there is no signal for buying or even for a correction. Volatility is low – only 71 points. Today, the outcome of the ECB meeting may affect the British pound, but first, it needs to impact the euro, which has also been stagnant for the past five days.
It’s time to take a closer look at the US inflation report, which traders have eagerly awaited, and it seems that it was all in vain. At least, based on the movements of both currency pairs yesterday, it can be said that the market did not understand what the numbers meant. The Consumer Price Index accelerated to 3.7% y/y in August, which is undoubtedly bad. Bad for the US economy, but not for the dollar, as the Fed is now guaranteed to raise the rate at least one more time this year. And maybe even twice. Maybe even in September.
However, at the same time, the core inflation rate dropped to 4.3%, as experts had predicted. So, inflation slowed down, but core inflation increased. And what decision the Fed will make on the interest rate next week has become less clear. The American regulator may leave the rate unchanged against the backdrop of a decline in core inflation or raise it unexpectedly due to rising core inflation. The market is now in complete stagnation and needs help understanding what to expect and what to do. There are just as many unanswered questions in the situations with the Bank of England and the ECB. Thus, we wait and observe the development of the situation.
The average volatility of the GBP/USD pair over the past five trading days is 71 pips. For the pound/dollar pair, this value is considered “average.” Therefore, on Thursday, September 14th, we expect movement within the range limited by the levels of 1.2430 and 1.2572. A downward reversal of the Heiken Ashi indicator will signal a new attempt to resume the downward 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:
The GBP/USD pair in the 4-hour timeframe continues to hover near its local lows. Therefore, at the moment, you can stay in short positions with targets at 1.2430 and 1.2421 until the price firmly closes above the moving average. However, the movements are currently weak. Long positions can be considered after the price firmly closes above the moving average line, with targets at 1.2573 and 1.2604.
Explanations for the illustrations:
Linear regression channels – help determine the current trend. If both point in the same direction, the trend is currently strong.
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 in which the pair will move the next day, based on current volatility indicators.
CCI indicator – its entry into the overbought zone (above +250) or oversold zone (below -250) indicates a potential trend reversal in the opposite direction.
The material has been provided by InstaForex Company – www.instaforex.com
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