2016-08-18 14:42:41

Overview and dynamics
As we talked about in the previous article, today two factors contribute to the fundamental nature of GBP/USD pair’s growth. This week is shaping up to be successful for the pound and GBP/USD pair.

Following the publication on Tuesday, the major UK price indices in July (indices of retail prices, consumer prices and producer prices), which proved to be very positive, GBP/USD pair broke the August short-term (within one month) downtrend and rebounded from the support level 1.2875 ( the lower limit of the channel on the daily chart). Near this level there is also the support level 1.2900 (Fibonacci level 0%).

Earlier, the pair corrected from this level to the level 1.3365 (Fibonacci level 23.6%), however, after in early August the Bank of England lowered interest rates and expanded the program to stimulate the UK economy, GBP/USD pair was back to the support level 1.2875. Thus a range was formed between the levels 1.3365 (Fibonacci correction level 23.6% to the drop of the pair after the referendum on Brexit) and 1.2875 (the lower line of the channel on the daily chart), in which GBP/USD pair has traded since the second week of July.

Our opinion
It is likely that after this week’s release of encouraging inflation data from the UK in July the Bank of England can now refrain for a while from further action as to the further stimulatio of the economy. And this can support the pound in the short term. The next meeting of the Bank of England on the matter is scheduled for September 15.

Since the opening of today's trading day, GBP/USD pair has gained almost 120 points and is located above the support level 1.3140 (EMA144 on the 4-hour chart).

OsMA and Stochastic on the 4-hour and daily charts went over to the buyers. The corrective growth is likely to continue towards the resistance levels 1.3230 (EMA200 on the 4-hour chart), 1.3365 (Fibonacci level 23.6%, EMA50 on the daily chart and the upper limit of the range).

Nevertheless, the medium-term fundamental background (the difference between the monetary policies of the Bank of England and the Federal Reserve, as well as expectations of near-zero growth in the UK economy in 2017) will put pressure on GBP/USD pair ,and on approaching the resistance level 1.3365 one needs to be extremely careful when opening long positions on GBP/USD pair.

In the weekly and monthly charts indicators continue to recommend short, medium-term positions and GBP/USD pair is in a downward channel on the weekly chart with a lower limit below the level 1.2600.

In the case of the breakdown of the resistance level 1.3365 further growth of GBP/USD pair is possible to the levels 1.3630 (2009, 2001 lows, closing price of "Black Friday"), 1.3655 (38.2% Fibonacci level).

Further dynamics will be mainly associated with the actions of the Federal Reserve and the Bank of England as well as with the release of economic data in the UK and US.

Support levels: 1.3140, 1.3060, 1.2900, 1.2875, 1.2800, 1.2700
Resistance levels: 1.3230, 1.3300, 1.3365, 1.3440, 1.3500, 1.3630, 1.3655

Trading recommendations
Sell Stop 1.3130. Stop-Loss 1.3180. Take-Profit 1.3100, 1.3060, 1.2900, 1.2875, 1.2800, 1.2700
Buy Stop 1.3190. Stop-Loss 1.3130. Take-Profit 1.3230, 1.3300, 1.3365, 1.3440, 1.3500, 1.3630, 1.3655

Support at 1.3140
Support at 1.3140

Rebound from the level 1.2875
Rebound from the level 1.2875