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GBPUSD Reaches Ichimoku Cloud | Forex Economic Overview


Sep.05.2016

GBPUSD Reaches Ichimoku Cloud

After a free fall to an all time low, finally GBPUSD reaches Ichimoku cloud on the daily chart on some rad UK economic data on Monday. This all happened while we were enjoying the Labor Day holiday here in the US. So without further ado, let's get to the bottom of the pair's moves and what we could expect next.

GBPUSD Reaches Ichimoku Cloud - Kiana Danial of Invest Diva Reports GBPUSD Reaches Ichimoku Cloud - Kiana Danial of Invest Diva Reports

 

What went down in the UK?

The UK services PMI killed it on Monday, coming in way better than expected and previous learning, giving the British Pound yet another boost. The Services diffusion index, by Markit Economics, printed 52.9 from the prior reading of 47.4, beating economists’ expectations of a 50.0 figure. The rise by 5.5 points was the largest observed over the 20-year survey history.

GBPUSD Reaches Ichimoku Cloud  | Technical Analysis

As Invest Diva predicted in August the GBP/USD pair seems to have bottomed out and formed a double bottom. On Monday news, GBPUSD Reaches Ichimoku Cloud. More specifically, the GBP/USD pair tested the 23% Fibonacci level and the lower band of the Ichimoku cloud at 1.3340, which also happens to be an important pivot level and the neckline of a potential double bottom pattern we identified last week. With this, the pair has 3 strong pivot levels including the extended 1.3630 and 1.3850 levels to break before we can fully change our long term outlook to bullish.

GBPUSD Reaches Ichimoku Cloud GBPUSD Reaches Ichimoku Cloud - Technical Analysis

The extended resistance is set above the Ichimoku cloud, at 1.4090 while support remains at the all time low level, 1.2875.

 

Coming up on the Economic side...

Coming up on the economic calendar UK’s 10-y Bond Auction will be out tentatively on Tuesday while US ISM Non-Manufacturing PMI  could shake the GBP/USD pair further at 2 PM GMT. The index is expected to read around 55.4, a bit lower than August reading. In general, a reading above 50.0 indicates industry expansion, while below indicates contraction, so a better than expected result could push GBP/USD lower. 

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On Wednesday UK Manufacturing and Industrial Production are scheduled for 8:30 AM GMT and during the New York session FOMC Member George Speaks at 2 PM, which again could create volatility in the pair.

 

Trading Strategy

Bullish Scenario: As GBPUSD reaches Ichimoku cloud, we could prepare for a long-term bullish trading strategy.

Keep in mind that depending on the strength of the current sentiment and upcoming economic data, the pair may not be able to break the pivot of 1.3350.

In the case, we could see another move back down towards 1.2875 so the pair can regain energy, form a triple bottom pattern and try out the neckline once again.

To develop a long-term strategy, first calculate your risk appetite as well as risk tolerance. Then you can decide whether to take the risk of entering a bullish entry now, or waiting to see if the pair breaks above the neckline.

For targets, again depending on your risk tolerance, you can go for any of the levels printed out in the table below.

Bearish Scenario: On worse than expected UK data or better than expected US data we could see the pair moving back to the all time low of 1.2875. Short term bears can take advantage of this move on market news.

 

More on Economic Calendar

Tuesday

Asian Session: During today’s Asian session Australia released their rate statement

London Session: We are expecting German Factory Orders for July to be released at 6 AM GMT, followed by Swiss Consumer Price Index at 7:15 AM GMT.

New York Session: Moving on to the New York session and America’s first trading day of the week, we are expecting their ISM Non-Manufacturing Composite to shake the markets at 2 PM GMT. 

 

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Wednesday

Asian Session:  Earlier during the Sydney session Australia’s Gross Domestic Product  makes headlines as well as Japan’s Leading Index.

London Session: We are expecting German Industrial Production to be out at 6 AM GMT and shake the EUR crosses. UK Manufacturing and Industrial Production are scheduled for 8:30 AM GMT.

New York Session: The hot economic data during the New York session will be out of Canada, as they release their Rate Decision at 2 PM GMT. The market is expecting Bank of Canada to keep rates unchanged at 0.50%, while a decision to lower rates can spur economic growth while inciting inflationary pressures, and therefore leading to a weaker Canadian dollar, also known as the Loonie.

Next Day's Asian Session: Moving forward during the next day’s Asian session, Japan will release their GDP and Current Account at 11:50 PM GMT to end the trading day.

 

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

Support Levels Turning Point Resistance Levels
1.2875 1.3350 1.3850
1.3125 1.3630 1.4090

 

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 xoxo

Kiana 喜愛成
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