Double Bottom Formation Signals Potential for Continued Upside

Summary:

UK's August GDP grew month-over-month and showed signs of economic recovery. On the technical front, a double bottom has formed in the 4-hour chart, suggesting that the GBPUSD pair may continue its upward trend.

BUY GBPUSD

Close Time

CLOSED

1.30576

Entry Price

1.32350

1.29950

1.34963 +0.00095 +0.07%

62.6

Pips

Loss

1.29950

1.29949

Exit Price

1.30576

Entry Price

1.32350

Fundamentals

On October 11, data from the UK Office for National Statistics showed that the British economy grew by 0.2% month-over-month in August, following two months of stagnation. Growth was seen across services, production, and construction sectors, indicating that the UK economy could post growth in the third quarter.

The manufacturing output increased by 1.1% in August, exceeding expectations of 0.2%, compared to a previous decline of 1%.

The industrial output rose by 0.5%, above the expected 0.2% and prior contraction of 0.8%.

The overall goods and services trade deficit was £9.55 billion, significantly better than the expected deficit of £59.25 billion and a previous deficit of £75.14 billion.

These figures suggest that the UK economy is showing signs of recovery.

The US Department of Labor reported that September's CPI data showed a 0.2% monthly increase and a 2.4% annual rise, both slightly above expectations. However, the 2.4% annual growth is the lowest since March 2021.

Moreover, initial jobless claims in the US reached a 14-month high of 258,000 for the week ending October 5, an increase of 33,000 from the previous week, which was significantly higher than anticipated. While US inflation has eased, it remains above target, and the volatility in the employment market could impact Fed policy decisions.

There are speculations that if there are no substantial changes in labor market or inflation data by year-end, a further 25 basis point rate cut may occur in December.

Technical Analysis

Double Bottom Formation Signals Potential for Continued Upside_1

GBPUSD has been in an overall upward trend since May, with higher highs and higher lows in the chart, signaling strong bullish momentum.

In the daily chart, the pair faced resistance at the 1.3410 level and has since pulled back to test the key support level at 1.3039. The uptrend is likely to continue if the price holds at this support. A break below this level, however, would signal a shift to a bearish trend, opening up further downside potential.

Notably, a double bottom has formed at the 1.3039 support level in the 4-hour chart to indicate continued upward movement for the pair.

In terms of trading strategy, consider buying the dips, but ensure to set stop-loss orders to manage risk.

Trading Recommendations

Trading Direction: Buy

Entry Price: 1.3070

Target Price: 1.3235

Stop Loss: 1.2995

Valid Until: Oct 25, 2024 15:00:00

Support: 1.3060, 1.3021, 1.3001

Resistance: 1.3113, 1.3174, 1.3253

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