Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Pound Sterling Looks To Break Out Of Sideways Channel

By InstaForex GroupForexOct 14, 2021 06:17AM ET
Pound Sterling Looks To Break Out Of Sideways Channel
By InstaForex Group   |  Oct 14, 2021 06:17AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

Yesterday brought a host of positive news for the pound sterling. Although the growth in the UK industrial production slowed, the data was well above the forecast.

The growth pace slowed down to 3.7% from 3.8%, whereas analysts had expected a fall to 3.2%.

In addition, the previous report was revised upwards to 4.4%. The UK industrial production advanced by 0.8% instead of 0.4% MoM, as expectedy.

In general, the industrial production report significantly exceeded the forecast. The situation in this segment of the UK economy is much better than expected.

It's no wonder that the pound surged.

UK industrial production data chart.
UK industrial production data chart.

US Inflation Data Steals the Show

However, the US inflation data overshadowed the UK industrial production report.

It is the main event of the week. Economists had expected that the indicator would remain unchanged.

But, it grew to 5.4% from 5.3%, paving the way for the Fed to launch the quantitative easing (QE) program's tapering as early as November.

The US dollar rose after the data was out. An hour later, the greenback lost all gains and fell. Comments by various representatives of the US financial sector could have caused the drop.

Each of them said that the regulator might announce the QE tapering after a new jump in inflation.

Notably, both the inflation rate and the labor market conditions point to higher inflation.

This could be considered an attempt to put pressure on the Fed to postpone the tightening of the monetary policy.

For the financial sector, a reversal of the QE policy could drive the financial market.

This, in turn, may cause a lot of difficulties. Nevertheless, the Fed has to consider all the factors and not only the short-term interests of the financial sector.

The regulator may ignore the ideas that contradict the long-term economic growth prospects.

US Inflation data chart.
US Inflation data chart.

Today, the situation may change, and the US dollar is likely to resume gaining in value.

Although the US unemployment claims forecast is optimistic, the data will hardly affect the market sentiment. The number of first-time claims could decline by 11,000, whereas continuing claims may drop by 65,000.

At the same time, the US producer price index may alter the market situation. In the best-case scenario, the PPI could climb to 8.5% from 8.3%.

A jump to 8.7% wouldn't be out of the ordinary either. Since the PPI is a leading indicator for inflation, its growth indicates that inflation is unlikely to stop surging soon.

But, the US inflation rate may continue moving up. As a result, the US Fed would have no option but to tighten the monetary policy. Thus, the PPI figures may settle the issue of the timing of the QE tapering.

US Producer Price Index data chart.
US Producer Price Index data chart.

GBP/USD - Technical Outlook

GBP/USD has been trading near the resistance area of 1.3620/1.3650 for the past week, entering a sideways channel of 1.3540/1.3670.

On the four-hour chart, the RSI technical indicator is hovering near the 50 line, signaling stagnation.

The 23.6 Fibonacci level lies in the middle of the sideways channel, proving the balance in the market.

Pound Could Break Out After Accumulation

The pound/dollar pair may continue hovering within the range of 1.3540/1.3670 for some time.

This may lead to the accumulation process, thus causing an upward impulse.

If the predictions come true, traders are better off applying a breakout strategy.

Trading Strategy

Traders may open buy positions after the price consolidates above 1.3680.

Once the price fixes below 1.3640, one can go short.

In terms of the complex indicator analysis, technical indicators provide mixed signals on the one-minute and one-hour charts due to a sideways channel.

According to the technical analysis, traders could get selling opportunities in the mid-term.

GBP/USD 4-hour chart technical analysis.
GBP/USD 4-hour chart technical analysis.

InstaForex Group

Pound Sterling Looks To Break Out Of Sideways Channel

Related Articles

Pound Sterling Looks To Break Out Of Sideways Channel

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email