On Friday, the US retail sales and inflation didn’t expand as expected causing the greenback to pullback from their highs. Well, this could change the views of the Federal Reserve given that inflation is one of the metrics they take into consideration when formulating their policies. Though we expect rate hike this month, a slowing inflation coupled with stagnant wages is sure to weigh in and perhaps a cautionary tone should take its course in the coming days. What is apparent though is that the recent surge of the GBP is near its end at least when technical pointers are brought into the equation. With new taxes burdened on UK citizens-council taxes and new excise duties on automobiles and inflation rising to near highs, their purchasing power will be interrupted negatively and this should also have an effect on retail sales which is expected this week. It dipped from last month’s reading by -1.8% and should it not expand according to analysts view, the GBP should correct from their highs.
Technically, the GBP is overextended and offers an arbitrage position due to this overvaluation. Evidently, the Pound closed above the upper BB and the sell signal printed in the weekly chart isn’t common. The last time it happened was on 2015 and it lingered at overbought territory for sometimes. I will therefore look to short the GBP and gain some money while doing it with entry in the 4HR chart as follows:
Sell Stop: 1.7330
Stop Loss: 1.7480
Take Profit: 1.6860-1.7070-Take Profit Zone as region of support in the 4HR chart.
Have a good trading day.