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Chart Of The Day: Fiscal Plans Devalue Pound, Technicals Provide Trading Framework

By Pinchas Cohen/Investing.comForexSep 29, 2022 08:27AM ET
www.investing.com/analysis/chart-of-the-day-fiscal-plans-devalue-pound-technicals-provide-trading-framework-200630454
Chart Of The Day: Fiscal Plans Devalue Pound, Technicals Provide Trading Framework
By Pinchas Cohen/Investing.com   |  Sep 29, 2022 08:27AM ET
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In response to Prime Minister Liz Truss' defense earlier today of Friday's massive package of unfunded tax cuts that rocked markets, the pound sterling lost two days' worth of gains, and UK gilt yields increased.

Mark Carney, former governor of the Bank of England, charged that the UK government was "undercutting" the country's financial institutions adding that its fiscal plans were to blame for the decline in the value of the pound and government bonds. The International Monetary Fund and rating agency Moody's Investors Service criticized the UK government and also issued warnings.

GBP/USD 4-Hour
GBP/USD 4-Hour

On the technical front, the GBP was retesting the top of a rising flat on the 4-hour chart. If the price closes above 1.1000, it will have blown the presumed downward-continuation pattern. Alternatively, if the pound closes below 1.0700, it will likely repeat downward the same move preceding the range, aiming at 0.9700.

Trading Strategies

Conservative traders should wait for the price to complete the pattern, fall below 1.0500, then wait for a return move to confirm the resistance before risking a short position.

Moderate traders would be content with a close below 1.0600 and a corrective rally for a better entry, if not for added resistance confirmation.

Aggressive traders can short now off the flag's top.

Trade Sample - Aggressive Short

  • Entry: 1.0900
  • Stop-Loss: 1.0925
  • Risk: 25 pips
  • Target: 1.0700
  • Reward: 200 pips
  • Risk-Reward Ratio: 1:8

Disclaimer: At the time of publication, the author had no positions in the stocks mentioned.

Chart Of The Day: Fiscal Plans Devalue Pound, Technicals Provide Trading Framework
 

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Chart Of The Day: Fiscal Plans Devalue Pound, Technicals Provide Trading Framework

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Comments (4)
Mr Doodl
Mr Doodl Sep 29, 2022 3:28PM ET
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I guess it was rather a falling flag after the rebounce. The target would be almost 1,11.
Son Yay
Son Yay Sep 29, 2022 11:44AM ET
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Reaganomic's Arthur Laffer Curve (trickle down) is voodoo.
Mohd Izhar Muslim
Mohd Izhar Muslim Sep 29, 2022 11:33AM ET
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Thank you for sharing the article 💯
Rajesh Upadhyay
Rajesh Upadhyay Sep 29, 2022 9:49AM ET
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UK IS TOTALLY SCREWED, NEW P.M.LIZ IS USELESS, ZERO ECONOMIC KNOWLEDGE. SHE'S GIVING FREEBIES & TAX CUT FORGETTING UK ECONOMY IS ALREADY IN DEEP ****TROUBLE. GAS, CNG, ELECTRICITY & FOOD SHORTAGES ARE REALITY. IF BoE DOESN'T INCREASE INTREST RATES & GOVERNMENT MUST INCREASE TAX STOP ALL FREEBIES, OTHERWISE UK IS FINISHED AND WILL BE DIVIDED IN 2 PARTS.
Yellow Owl
Mystic_Owl Sep 29, 2022 9:49AM ET
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Its amazing how karma comes full circle. What a fall from grace! UK was the monster once.
 
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