Lower UK Inflation Pushes Price Down

For now, it is time to wait and see whether the price bounces back following the UK inflation data release, or whether the price keeps falling.

My previous GBP/USD signal on 11^th September did not trigger any trade entry signal.

Risk 0.75%.

Trades may only be taken prior to 5pm London time today.

• Go long following a bullish price action reversal on the H1 timeframe immediately upon the next touch of $1.2309 or $1.2266.
• Put the stop loss 1 pip below the local swing low.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

• Go short following a bearish price action reversal on the H1 timeframe immediately upon the next touch of $1.2416 or $1.2481.
• Put the stop loss 1 pip above the local swing high.
• Adjust the stop loss to break even once the trade is 25 pips in profit.
• Take off 50% of the position as profit when the price reaches 25 pips in profit and leave the remainder of the position to run.

The best method to identify a classic “price action reversal” is for an hourly candle to close, such as a pin bar, a doji, an outside or even just an engulfing candle with a higher close. You can exploit these levels or zones by watching the price action that occurs at the given levels.

I wrote in my previous forecast for the GBP/USD currency pair that if the price one hour after London opened was above $1.2500 and rising convincingly, we will likely see more progress to the upside. I was correct, but not very convincingly, and the price only made it as high as $1.2548 over the London session.

The technical picture now is considerably more bearish, as the price has continued to fall over recent days to reach a price area very close to a new 3-month low. The price action is bearish both over the longer term and over the short term, with the area at $1.2370 looking fragile and liable to a bearish breakdown.

The release of UK CPI (inflation) data a short while ago came in well below expectations, showing a monthly increase of only 0.3% when an increase of 0.7% was expected. This reduces expectations of rate hikes, and therefore has pushed the relative value of the Pound lower immediately following the release.

If we get two consecutive lower hourly closes below $1.2370 during the first half of the London session, I will be ready to enter a new short trade targeting the nearest support level at $1.2306.

For now, it is time to wait and see whether the price bounces back following the UK inflation data release, or whether the price keeps falling.

Regarding the USD, there will be a release of the FOMC Federal Funds Rate, Statement, and Economic Projections at 7pm London time. There is nothing of high importance scheduled today concerning the GBP.

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