The British pound tumbled against the U.S. dollar after inflation slowed in the United Kingdom. The weakness took price below the 1.60 handle and now opens the door for further weakness to target the 1.58 handle.
The annual consumer price growth reading came in at 1.2%, a little lower than the forecast of 1.4%, and much cooler than the 1.5% growth in August. This report could very well have eliminated any chance of a rate hike to occur this year. With expectations being delayed once again, further weakness may hit sterling.
The daily chart above shows that the downward trend is going strong and that price may see a slight rebound if the bullish butterfly pattern is valid at around the 1.5800 handle. If bullishness takes out the long-term bearish trend line (around the 1.61 area), further upside may be capped at around the 1.6250 level.
The trade: Sell GBP/USD at 1.5945 with a stop loss at 1.6005 and a take profit at 1.5820 The Risk/Reward Ratio is almost1:3
Edward J. Moya
WorldWideMarkets Online Trading