GBPUSD Technical Analysis – The market awaits the US CPI report

Fundamental
Overview

The USD got a short term
boost recently as Trump floated reciprocal tariffs. That came after a good US NFP report where the data was mixed at best but
still pointing to strength. The jump in average hourly earnings caught the eye
but that might have been distorted by the drop in average weekly hours.

We’ve also got another jump
in inflation expectations in the University of Michigan Consumer
Sentiment survey
showing that the tariffs news is the main culprit of the recent surge in
expectations.

The focus now switched to
the US CPI report due later today where Core inflation is expected to tick
lower which would be a welcome news. A lower than expected print should see the
US Dollar losing ground across the board once again, while a hot reading might
boost the greenback for the rest of the week.

On the GBP side, the BoE last
week cut interest rates by 25 bps as expected and we got a
more dovish than expected vote split with the known hawk member Mann even
voting for a 50 bps cut.

The pound sold off
initially but then started to fade the weakness as the market focused on the
word “careful” that was added in the “gradual and careful approach to
the further withdrawal of monetary policy restraint is appropriate” line.

BoE’s Bailey then doubled down on that, saying
that it was deliberate because of the uncertainty they are facing, so that
brushed aside the more dovish expectations for the rates path triggered by the
vote split.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD maintains the uptrend structure with the series of higher lows
into the key resistance zone around the 1.25 handle. That’s
where we can expect the sellers to step in with a defined risk above the
resistance to position for a drop into the 1.20 handle. The buyers, on the
other hand, will want to see the price breaking higher to increase the bullish
bets into the 1.28 handle next.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have an upward trendline defining the bullish momentum. If we get a
pullback into the trendline, the buyers will likely lean on it to position for a
break above the resistance. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into new lows.

GBPUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a minor support around the 1.2420 level. This is where we can
expect the buyers to step in to position for the break above the key
resistance. The sellers, on the other hand, will look for a break lower to
target the major trendline.

From a risk management
perspective though, it would be much better to wait for the US CPI report as
any technical setup can be invalidated in a blink of an eye when the data gets
released. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US CPI report. Tomorrow,
we get the UK GDP, the US PPI and the latest US Jobless Claims figures. On
Friday, we conclude the week with the US Retail Sales data.