Question: I'm looking for a HTTP compression proxy. Basically, I need a proxy to compress images and text to be transferred over a slow internet connection when accessing the web. To put it into a diagram

CLIENT ---/fast local network/--- HTTP COMPRESSION PROXY ---/slow internet connection/--- WEB (e.g. Facebook, Wiki, Google)

I will be using Squid for caching but from what i've it does not support HTTP compresion (gzip, deflate)

Answer: 
A quick review of the documentation leads me to believe that squid will accept and cache compressed data from the servers. Compressing images will likely be counter productive. Most image formats are well compressed already and attempts to compress them usually increase the image size by the overhead of the compression algorithm.

You could use apache as proxy. You should provide lots of disk space for squid to cache data. Review the caching options carefully and watch your cache statistics. I have found certain sites don't cache very well at all.
Do you realize that Image data does not compress very well. It often takes more time in these cases to compress/transmit/uncompress than to simply transmit the image data without compression.