Forex Opinion & Analysis

Sterling To Resume Growth On U.S. Durable Goods Orders

On Tuesday, the pound was trading in a narrow range throughout the whole session. In other words, the sterling was stuck in a flat channel. This was hardly surprising as the economic calendar was almost empty yesterday.

Today, however, markets expect the data on durable goods orders in the US. Their volume is estimated to fall by -0.2% in a best-case scenario. Yet, according to some forecasts, the reading may show a -0.3% decline. Durable goods orders reflect future dynamics of retail sales which, in turn, serve as the best indicator of consumer activity.

The latter is the major driving force for the US economy. A reduction in the volume of durable goods may well indicate a possible decline in retail sales. Therefore, the pound has a good chance of breaking through the upper boundary of the channel formed on Tuesday.

Durable Goods Orders (US):

Durable Goods Orders
In the course of a correction, the pound managed to win back some of its losses from the previous week. From the technical viewpoint, the key level for the market is located at 38.2, Fibonacci retracement at 1.3750. This is where a flat channel was formed in the area of 1.3700/1.3750.

Lower volatility signals the process of accumulation which may cause a rapid price movement. The accumulation process is confirmed by the RSI that is moving along the level of 50. On the daily chart, we can observe a downward movement from 1.4000. It should be noted that a market correction is an integral part of a descending cycle.


In this situation, we can assume that the GBP/USD pair is likely to fluctuate within the range of 1.3700/1.3750 for some time. Acceleration of the price is very possible now, so the strategy of a breakout of either boundaries will be relevant.

Traders will consider long positions on the pair if the price settles above the level of 1.3755. Short positions will become relevant if the price holds below 1.3700.

Comprehensive indicator analysis confirms a mixed signal in both minor and intraday time frames due to the flat movement. In the medium-term time frame, a sell signal is formed amid a downward movement from the level of 1.4000.
InstaForex Group


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