It has been an active trading week on the forex, marked by heavy participation and volatility across the majors. For the first time in 2018, we have seen several directional moves in USD valuations. Drops against the Japanese yen, Swiss franc, and Euro have led the action.

With a little over 24 hours left until Friday’s close, be aware of the following events:

Country                                Event

New Zealand                       Building Permits (Nov.)

Japan                                    Foreign Investment Reports (Dec. 29)

China                                    Import/Export, Trade Balance (Dec.)

Eurozone                             CPI (Dec.)

United States                      CPI (Dec.)

It will be an active news cycle, so be sure to exercise extreme care with open positions. In the wake of China’s new stance towards U.S. Treasuries, all eyes will be upon the Chinese Trade Balance reports. Be on the lookout for strong rhetoric toward U.S./China trade relations.

CPI numbers will play large roles in tomorrow’s forex action. The U.S. CPI is expected to fall moderately, with the Core CPI predicted to rise. Make no mistake, the FED is watching these numbers very closely. Any report that supports inflation hitting the coveted 2% target during the first half of this year will be ammunition for a policy of aggressive tightening.

USD/GBP Technical Outlook

With so much going on in the U.S. overnight session, it may be a good idea to take a passive stance rather than attempting to ride the wave. A look at the GBP/USD daily chart gives us a few levels to trade for the post-CPI period.

Today’s action has provided an exact test of support at the Bollinger MP (1.3458). It does not happen very often, but it appears that this level will be the session low. Here are the key areas to watch for the remainder of the day:

• Resistance(1): Wednesday’s high, 1.3562
• Resistance(2): Swing high, 1.3612
• Support(1): 20 Day EMA, 1.3475
• Support(2): Bollinger MP, 1.3458
• Support(3): 13 Day SMA, 1.3399

Bottom Line: Trading the news can be a challenging task. Risk and reward must be properly aligned and leverage held in check. Often, executing a counterpunch strategy after volatility from an economic event settles is the best approach.

With price trading near 1.3525, both support and resistance are a considerable distance away. Upon today’s forex close, these levels are likely to tighten up. In the event that a trade recommendation develops after tomorrow’s CPI reports, I will pass it along.

Until then, check out the trading signals page. There are currently a number of active trades, each providing a structured way of engaging the forex, indices, and cryptocurrency markets.