GBPUSD Technical Analysis – Hot UK CPI boosts the GBP

Fundamental
Overview

The USD has been
generally under pressure since the benign US CPI report last week as the
hawkish expectations subsided and the market switched its focus from inflation
back to growth. This triggered a positive risk sentiment which is generally
negative for the greenback and benefited the other major currencies.

The GBP, on the
other hand, got a boost today from the hot UK
CPI report where the data beat expectations across the board. The services
inflation figures, which is what the BoE cares most about, came in much higher
than expected showing once again that inflation remains very sticky on the
services side. The markets pared
back expectations for a rate cut in June with even August now being in
question.

GBPUSD Technical
Analysis – Daily Timeframe

On the daily
chart, we can see that GBPUSD recently broke above the key swing level at the
1.27 handle as the pair continued to gain ground on a softer US Dollar. From a
risk management perspective, the buyers will have a much better risk to reward
setup around the trendline,
but we will likely need some hot US data to trigger such a big correction.

The sellers, on
the other hand, will need the price to fall below the trendline to turn the
trend around and start looking for new lows.

GBPUSD
Technical Analysis – 4 hour Timeframe

On the 4 hour
chart, we can see that we have a good support
around the 1.2634 level where we can find the 38.2% Fibonacci
retracement level for confluence.
If we get a pullback into that level, we can expect the buyers to lean on it
with a defined risk below it to position for a rally into new highs.

The sellers, on
the other hand, will want to see the price breaking lower to increase the
bearish bets into the trendline.

GBPUSD
Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that the price spiked right into the upper limit of the average
daily range and started to pull back. The buyers can look to buy the dip
around the 1.27 handle where we can also find the minor white trendline.

The sellers, on
the other hand, will want to see the price breaking lower to invalidate the
bullish setup and pile in for a drop into the 1.2634 support.

Upcoming
Catalysts

Today we have the FOMC Minutes late in the day although it’s
unlikely to be market moving. Tomorrow, we will get the latest UK and US PMIs,
and the US Jobless Claims figures. Finally, on Friday, we conclude the week
with the UK Retail Sales data.

See the video below

This article was written by Giuseppe Dellamotta at www.forexlive.com.