Since the blog earlier in the week, we saw the pound’s Composite as well as Services PMI’s both came out 0.1 points less than expected which is usually seen as a negative for a currency but when looking at the bigger picture it was the fastest expansion of the UK service sector in five years which rose up sharply from 47.1 in June. Keeping this data in mind, let’s look below at the 4 hour chart to see how this pair reacted.
Not much price action has taken place since the last post but it’s important to note that we are still trading between the ascending and descending trend lines shown on this time frame which can be seen as a rising wedge.
On the 1 hour time frame above, we can see that the trend line provided some resistance shown by the downward pointing arrow as well as the highlighted ellipse. We can also see that price started making higher highs and higher lows. Once price broke and closed above the 1 hour time frame trend line, we can see that we had a perfect retest of the trend line shown by the upward pointing arrow and ellipse. However, we just had a break of structure to the downside and we are currently retesting the bottom end of the rising wedge as well as the descending trend line. If price breaks and closes below the rising wedge we will see further downside movement on this pair.
We have seen a positive fundamental shift for the pound since the staggered reopening of their economy which is evident when considering the release of their impressive services sector data as well as the most recent release of their Construction PMI which surpassed expectations and is up 3 points from the previous month.
Remember to always consider fundamentals before entering any trade set up and try to use news events as an extra confluence. If you find yourself entering a trade without the backing of fundamental analysis ensure that you are following the correct risk management. Hit the subscribe button below to receive blog updates sent directly to your email.