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Monday

GBP/USD

Fundamental: On Thursday Ben Bernanke announced that the third round of Quantitative Easing would begin, causing the dollar to free fall for a short amount of time. Since investors were already expecting this move, USD had been falling throughout the month. Nevertheless, QE3 will put a downward pressure on USD and should cause GBP/USD to appreciate, all else being constant.

On Tuesday the US will its CPI Inflation data, which will be crucial for the pair. This is usually used for the Bank of England’s inflation target. Previous CPI data was 2.6% versus a forecast of 2.3%, and this month analysts are expecting the percentage to be at 2.5%.

Therefore, traders should look out for the news on Tuesday and then initiate a position. QE3 is likely to appreciate the pair throughout the week, but right now the conditions are overbought. This should resolve soon and the rally is likely to continue.

Technical:



The chart for GBP/USD is much similar to EUR/USD. Before September the pair was mildly rising in an upward channel, but adopted a new angle on the 4th of September and has been rising in the new channel ever since. The price did not have to face significant resistance levels until now, where there is resistance at 1.6296. The price is very close to this mark, so traders should wait and see if there shall be a breakout or a reversal. In case the resistance level is breached, traders should expect a decent rally which is supported by QE3. In case of a reversal, the price is likely to reach back to the support level at 1.616. From a long term perspective, any reversal would be brief and appreciation is more likely.

MACD has been above the 0 mark since the start of August. Recently, it gave a brief bullish signal but is giving a bearish one at the moment. Since MACD is being supported above the 0 mark, it is likely that its bullish signals will be much stronger than the bearish ones.

Stochastics have been bearish the whole day. They’re reaching the oversold mark soon, but according to historical analysis they should remain here very long. Traders should wait for a bullish signal before initiating a trade, as the news on Tuesday is very important.



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