GBP/USD Analysis: Trend reversing supports to watch

The FED seems to be having troubles with the rebounding labor market, however inflation hike is snapping on FED’s heels.

The FED seems to be achieving its goals of the US labor recovery. The US labor market surges lighting the green numbers on the economic calendar. Despite the promising economic outlook, the market seems to have a mixed reaction. On one side, there is the FED with forecasts and some forecasts are becoming valid, on the other is the valid assessment. Decreasing unemployment, rising payrolls, consumer confidence simply won’t stay behind the scenes of the “Inflation is under control” saga by the FED. Whereas, there are notes that rate hikes are coming sooner than predicted, it seems like no major Central bank, including the BoE, is willing to act before the FED.

This might be the position which puts the Pound Sterling in a weaker stance against the US Dollar.

There are three main events coming today which will affect the US Dollar index and have their own impact on GBPUSD, these are the US CPI, Crude Oil inventories and the Initial jobless claims. Jobless claims are expected to be lower than the previous month’s 269K by 4K, Core CPI and CPI are expected to continue the positive momentum. Crude Oil Inventories on the other hand are expected to be lower, amid a high demand and a recovery of the hospitality field. Decreasing oil inventories usually have a negative impact on the US Dollar index.

From the technical point of view, GBPUSD looks bullish.

The pair is in a bullish flag pattern, following the support and resistance zones of this downtrend channel.

RSI and MACD indicators on a 4-Hour GBPUSD are signalling an upcoming bullish reversal. The pair has also formed a double bottom pattern when GBPUSD retraced strongly after a retest of $1.34200 level.

Based on the price action, and taking into account a conceivable volatility this week during the release of the Economic data from the US, GBPUSD may also retest the $1.34200 and $1.33200 below that.

The retest of $1.33200 will complete a 5-wave move of the bullish flag and we can expect an escape from the bearish downtrend channel. However the indication of a high purchasing power on November 5 after a retest of $1.34200, RSI and MACD indicators signal that the uptrend reversal of the pair is already in progress.