Risk event 23/10/23: short GBP/USD on US GDP
There’s a fair bit of data to watch over the course of the week ahead, but Richard Snow, from Daily FX, takes the US GDP as the data point to watch. His trade idea is short GBP/USD.
The next line in the sand is $1.20 then onto $1.18 as the next line of support to watch.
(AI Video Trancript)
The release of U.S. Q3 GDP
In the upcoming week, there's an important event that could cause changes in the market. It's the release of U.S. Q3 GDP, which measures the growth of the American economy. The estimate is that it will show a strong growth rate of 4.1% compared to the previous quarter. This is good news for the U.S. dollar, which is expected to remain strong and attractive to investors looking for a safe place to put their money.
The GBP
On the other hand, things are not looking as great for the GBP. There have been some concerns about the labor market in the UK, and the unemployment data, which was delayed a week, will finally be released on Tuesday. The data has been showing some negative trends, suggesting that the UK economy may not be doing as well as expected. This potential weakness in the pound is something to keep an eye on.
GBP/USD
Looking at the price chart, there seems to be a close connection between cable (which refers to the GBP/USD currency pair) and the S&P 500 (a stock market index in the U.S.). Recently, when U.S. equities declined, so did the cable. This means that if U.S. equities continue to go down, it could lead to the cable also moving lower.
U.S. equities
With all this in mind, there may be increased noise and volatility in the market this week. Traders are considering the possibility of entering the market at around 1.2 and setting a target for the price to go down to 1.2 by the end of the week. This is based on the belief that there could be more downside for the cable due to the correlation with U.S. equities and the potential weakness in the pound.
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