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GBP/USD Forecast 16 Oct 2014

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GBP/USD Chart 16 Oct 2014
Average: 5 (2 votes)

The British pound is gearing towards a break to the upside soon

As we have seen the best data on unemployment from the UK in quite a while we are exploring the opportunities for trading the British pound after the recent decline which drove it to almost one year lows. Binary options on the GBP/USD forex pair are currently trading around 1.5950, which is in the middle of the daily range.

The UK currency fell to an eleven month low towards the end of the Asian trading session on Wednesday as pressure from US dollar bulls was felt heavily across the board. However things have changed dramatically after the US released its latest retail sales figures at 12:30 GMT.

The report came out worse than expected and signaled declining consumer spending in the U.S., however this can be largely attributed to the dropping price of gasoline which has had an effect. The British pound took advantage of the negative data in the U.S., underscoring the positive unemployment report from the UK.

The unemployment rate dropped to 6%, which is the lowest since 2008, just before the eruption of the financial crisis. Wages also rose in the month of September, coming in at +0.7%, which is a good sign for future inflation. However for now there is no signs of the Bank of England hiking rates for now, so the pound remains weak.

This could change only as we get lower inflation in the US as well, which is far from a done deal. However for now we prefer to play the GBP/USD forex pair only after a break above or below trend lines occurs. We would be buying puts if we see a close below 1.5880.

However if we get another test to the upside and an hourly close above 1.6000, then a test to the upside is imminent and we will see another round higher with 1.6050 being threatened really soon. That said, we thing this is a remote possibility for now, so we would rather look for a break to the downside.

Expiry time: 20:00 GMT 16 Oct 2014

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