Lagging pound rally
The British pound GBP/USD indicates a modest pullback after the impressive rally when the Conservative Party won parliamentary elections on May, 7. Its two-week growth was the strongest over six years. Now market participants overestimate the British economy outlook. The Conservatives promised to cease tax rises for five years. Meanwhile, the budget deficit is equal to almost 5%, so in order to reduce it, spending cuts are planned. The British Treasury is going to announce Summer Budget on July 8. Until that time, the pound is more likely to be traded sideways. Moreover, the majority of investors expect the Bank of England to refrain from speaking in favour of a possible rate hike until July. The long-term negative factors for the pound might be regarded the plans of the governing Conservative Party to convene a referendum for consideration of leaving the EU in 2017. The BOE’s meeting minutes will be released on Wednesday. Retail Sales will be published on Thursday. The outlook is negative.
The GBP/USD currency pair is slipping down on the H4 chart after the robust growth. Parabolic trend indicator is showing a decline. RSI-Bars dropped below the level of 50. In our opinion, the momentum may be formed after the price falls and breaks the lower Donchian Channel boundary and the last fractal low at 1.563. Stop loss is to be placed at the level of the last two fractal highs and the upper Parabolic point at 1.582. After pending order placing, Stop loss is to be moved every four hours to the next fractal high (if any appear), following Parabolic and Donchian Channel signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the Stop loss level without reaching the order, we recommend cancelling the position: the market sustains internal changes which were not considered.
| Position | Sell |
| Sell stop | below 1.563 |
| Stop loss | above 1.582 |