Forex forecast - GBP/USD
Long trend at GBP/USD remains. The price forms a flag formation that has been activated and tested in the last 4 days. We have a breakthrough on a horizontal level of resistance, which was the last bear defense line. Fibonacci 23.6% succeed to keep up the pressure. From here the road to the bulls seems unobstructed. Let's look closely:
After the flag breaks, the price tests its upper diagonal, and then records a strong upward impulse, which in turn breaks the horizontal resistance. From the point of view of the indicators, Sequential starts a second phase of the ascending countdown with 2 on the top - Long remains more likely. DeMark 13 is in the over-purchase area - temporary consolidation is likely.
Today, at 11:30, data on inflation, production index and retail sales in the UK will be published. Investors will focus on inflation data, which is expected to decline: 2.8% versus 3.0% previous. If we do not see a fall in inflation but a retention or increase, it will give strong support to central bankers to raise interest rates, and from there we can expect a strong upward momentum in the pounds. Retail sales from the island will give a clear idea of how Brexit's consumption is developing. GBP received support after yesterday it was agreed that the Brexit agreement was close and would be good for both countries as well.
We expect the volatility of the pound trade today to remain at 11:30, after which the volatility will take precedence. Higher inflation than expected will be positive for GBP, and the likelihood of bullish sentiment will remain high. Otherwise, we expect the GBP to weaken slightly and the main driving force will be USD.
SL: 1.3760
Alternative Scenario: If the price goes back below the main diagonal and stays there in several successive bars, the positive scenario will break and are more likely to see a GBP/USD decline.
Jr Trader Petar Milanov
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