GBPUSD Short On Higher US CPITrade idea
Continue longer term GBPUSD downside with diverging macroeconomic data's and central bank policy. Entering trade if USD CPI comes in higher to support USD strength.
Fundamentals
GBP - The BoE has cut rates from the high of 5.25% to the current rate of 4.75% with more MPC members voting for a cut than anticipated. Inflation is holding around the target rate, currently at 2.3% with an increase in unemployment to 4.3% (previously 4%). PMI's and GDP have also seen lower readings in recent months, all of which supporting the continuation of the BoE's rate cutting cycle.
USD - The FED has been matching the BoE with the pace of the interest rate cuts but they have continued to stress the fact that they are data dependant and will hold rates if necessary. The hawkish undertones and the effects of the "Trump trade" had seen USD strength considerable over recent weeks. US CPI has increased from 2.4 to 2.6% with tomorrows release due to rise again, NFP increased more than expected along with PCE and PPI.
Trigger - Along with the technical setup below, I will be looking for the potential to place a short order beneath technical levels ahead of the US CPI. If this data comes out stronger to further support the GBPUSD short the order will be triggered. If CPI is softer, the order will be cancelled.
Technical Setup
4hr
- Clear trend lower with 200 EMA confirming trend direction
- Retracement back into a 50-61.8% fib level, 1.28000 psychological round number
- 200 EMA acting as dynamic resistance
- Weekly volume profile cave filled and acting as resistance
1hr
- Counter trendline and channel with price most recently failing to reach the channel high, possibly indicating counter trend weakness.
- Unconfirmed double top price pattern, breakout lining up with counter trendline
- 14 period RSI showing bearish divergence
Order placement will be below counter trendline breakout ahead of CPI release with the stoploss behind the swing high and a target at the recently swing long with potential to extend.
If the level breakout before CPI wait for entry, if CPI comes in lower than expected remove order.
