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HomeMarket analysisCapitalising on a Weakening Pound: Two Trading Approaches

Capitalising on a Weakening Pound: Two Trading Approaches

By Capital.com news

The pound weakened across the board on Friday after unexpectedly tepid retail sales numbers showed signs of stagnation in the UK economy.

Retail sales remained unchanged between February and March, following a revised 0.1% increase in the previous month, falling short of economists' more optimistic forecast of a 0.3% expansion.

Let’s delve into two GBP currency pairs showing momentum in the wake of the pound's decline.

GBP/USD

GBP/USD has been forming a bearish pattern of lower swing highs on the daily candle chart since March. Downward momentum intensified after breaching key support on April 12th, and following a period of tight consolidation, GBP/USD resumed its downtrend on Friday.

With both trend and momentum firmly bearish across daily and hourly candle charts, traders favouring trend continuation may consider shorting pullbacks or consolidations.

GBP/USD Daily Candle Chart

(Past performance is not a reliable indicator of future results)

GBP/USD Hourly Candle Chart

(Past performance is not a reliable indicator of future results)

EUR/GBP

Despite typically exhibiting less volatility than GBP/USD due to geographical proximity and deeper trade ties, EUR/GBP had a decisive break higher during Friday’s price action. This development suggests a potential retest of the New Year swing highs.

A closer look at the hourly candle chart highlights EUR/GBP’s bullish short-term momentum. Traders looking for trade continuation opportunities may consider buying pullbacks on the hourly timeframe.

EUR/GBP Daily Candle Chart

(Past performance is not a reliable indicator of future results)

EUR/GBP Hourly Candle Chart

(Past performance is not a reliable indicator of future results)

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