Last week, the victory of Trump coupled with lower than expected inflation rate in the UK pushed the Pound lower against the US dollar. Anticipating weakness, we had insisted on taking a short position in the GBPUSD pair on October 24th, with a target price of 1.2150. A one-touch put option was recommended for binary option traders.
The suggested trades resulted in profit in a matter of one week. Now, at the level of 1.2400, we believe that the GBPUSD pair stands a good chance to go up further due to the reasons mentioned below.
According to UK Office for National Statistics, the total quantity of goods bought by the customers in October was 1.9% higher than the previous month. It was not only higher than the upwardly revised 0.1% growth recorded in September but also greater than the 0.5% increase anticipated by the analysts.
The report indicates that the customers in the UK are hardly worried about the Brexit issue. The UK is basically a service-oriented economy. The analysts believe that it is one of the prime reasons for the domestic economy to remain strong. In fact, several market participants believe that the Brexit-related negotiations will have little effect on consumer behavior in the months ahead.
It can be remembered that the Bank of England had already warned about a strong rise in consumer prices in the months ahead. With such overwhelmingly positive retail sales data, there exists practically no probability of a rate cut as of now. In fact, the chances of a rate hike have increased considerably as there are firm indications that inflation may cross 3% in 2018.
As far as the Greenback is concerned, most of the future growth and the impact of the Fed rate hike has been priced in already. So, there exists a little chance of further strengthening of the US dollar. Considering the above-discussed facts, we forecast an appreciation in the GBPUSD pair in the near future.
The GBPUSD pair currently stands above an established support at 1.2280. The stochastic oscillator is almost near to the reading of zero. So, we can hope for a technical bounce back in the GBPUSD pair.
Based on this inference, we suggest taking a long position in the Forex pair near 1.2400. To avoid blowing up the trading account, a stop-loss order can be placed below 1.2280. The profit can be booked near 1.2650. Traders with risk appetite and patience can wait for the GBPUSD pair to hit the major resistance level of 1.2850. However, a trailing stop loss should be used to protect profits.
A binary trader can contemplate purchasing a one-touch call option to capitalize on the probable rise of the GBPUSD pair. The chosen expiry date should fall in the last week of December and the strike price should not exceed 1.2550.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
