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GBPUSD Inside Wedge -Super Thursday Ahead


Nov.02.2016

GBPUSD Inside Wedge

Ahead of hot market moving events Invest Divas are eying GBPUSD inside wedge way below the Ichimoku cloud. With Super Thursday, NFP and US elections ahead, let's take an IDDA approach to identify potential forex trading strategies.

 

GBPUSD Inside Wedge - Kiana Danial Forex Market Report GBPUSD Inside Wedge - Kiana Danial Forex Market Report

Technical Analysis - GBPUSD Inside Wedge

Medium Term

After the Brexit shock, the GBP/USD pair has managed to break way below the Ichimoku cloud and is curretly trapped inside a falling wedge. The pair is currently supported by 1.2115. Medium-term bullish pivot is set at 1.2760 which is the 23% Fibonacci retracement level on the Brexit downtrend. The long-term pivot is set at 38% Fibonacci level at 1.3170.

 

 

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Meanwhile, damaging economic data could open doors for further drops towards new lows at 1.15.

GBPUSD Inside Wedge - Technical Analysis Daily Chart GBPUSD Inside Wedge - Technical Analysis Daily ChartShort Term

On the 4-Hour chart, the pair has recently broken above a flat Ichimoku cloud which indicated short-term bullish market sentiment targetting upper band of the falling wedge.

GBPUSD Inside Wedge - Technical Analysis 4 Hour Chart GBPUSD Inside Wedge - Technical Analysis 4 Hour Chart

 

Fundamentals - GBPUSD Inside Wedge

What went down: The Federal Reserve kept rates unchanged on Wednesday but said ‘somewhat’ higher inflation strengthens case for rate hike. This semi-hawkish statement however was overshadowed by US election fears and the growing possibility of a Trump victory on November 8th.

What's up Thursday: Also known as super Thursday and we have yet another volatile day ahead starting with Bank of England (BoE) Rate Decision and Inflation Report set to be out 12 PM GMT.

The central bank is widely expected to stand still on monetary policy this month and the focus will be on the quarterly inflation forecast. Investors are looking for an improved inflationary outlook to counterattack British Pound’s weaknesses in the past months.

The US Initial Jobless Claims are set to be out at 12:30 PM followed by their ISM Non-Manufacturing Composite  at 2 PM.

 

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What's up Friday: The hottest market moving event of Friday is the US Nonfarm Payrolls for October released 12:30 PM GMT.

The economists are expecting pretty solid numbers, with non-farm employment expected to pick up by 176K, which would hopefully be enough to push down the jobless rate from 5.0% to 4.9%.

Side news: Right at the same time we have Canada’s Unemployment Rate for October which is expected to have remained the same at 7.0%. The combination could a ton of volatility in the USD/CAD pair which will therefore require savvy risk-management on Invest Divas.

 

 

Market Sentiment - GBPUSD Inside Wedge

71% of GBP/USD traders are in a long position within one the the largest forex brokers. We use this as a contrarian indicator to price action, and the fact that the majority of traders are long gives signal that the GBPUSD may continue lower.

On the other hand, the trading crowd has grown less net-long from yesterday and last week.

The combination of current sentiment and recent changes gives a further mixed trading bias.

Trading Strategy - GBPUSD Inside Wedge

Considering all points of the IDDA, we could consider a short-term trading opportunity during super Thursday, or stay on a watch-out for a long term strategy after the data is out.

Bullish Scenario

Depending on your  risk tolerance, you could consider a short-term bullish position targeting the upper band of the wedge at approximately 1.24.

Support is set at 1.2115.

A break above the wedge would change our medium-term outlook into bullish targeting 1.2760 and 1.3170 in extension.

Only a break above the Ichimoku cloud and pivot of 1.3170 woulc change our long-term outlook into bullish

Bearish Scenario

On the plenty of the risk events coming up this week and next, there is a possibility that the GBP/USD breaks below the support of 1.2115. With that you could consider setting up a bearish limit order below that level now, targeting lower band of the wedge at around 1.19 or 1.15 depending on your risk tolerance.

 

Here are Invest Diva's calculations for important GBP/USD approximate levels to keep an eye on:

Support Levels Turning Point Resistance Levels
1.2115 1.2760 1.3480
1.19 1.3170 1.38

 

 xoxo

Kiana 喜愛成
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