GBP/USD analysis: under pressure ahead May's words

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3120

UK inflation missed expectations, retreating sharply in September.
Brexit jitters weighed on Pound, as negotiations seen heading nowhere.

After hitting 1.3235 on Tuesday, the GBP/USD pair fell further this Wednesday, holding to modest weekly gains, but ending the day in the red amid a downward surprise in UK inflation. According to the official release, annual CPI decreased to 2.4% in September, below the previous 2.7% and the expected 2.85, while core yearly inflation came in at 1.9%, surpassing the market's estimate of 1.8% but below the previous 2.1%. The Retail Price Index remained flat in the same month and when compared to August, while it rose 3.3% YoY. Meanwhile, UK PM May is in Brussels trying to convince her European Union counterparts of her Chequers' plan. Speaking before addressing the summit members, PM May said that a deal can be sealed "over the next days and weeks," with a work from both parts, although hopes for a breakthrough in negotiations faded after weekend failed talks. The UK will release September Retail Sales this Thursday, seen -0.4% MoM and up 3.6% YoY in September.

The pair settled below the 50% retracement of its 2016/18 rally at around 1.3170, but well above its daily low of 1.3098. In the 4 hours chart, the price broke below its 20 SMA, which anyway presents a moderate downward slope a few pips below the mentioned Fibonacci resistance. The Momentum indicator in the mentioned chart maintains a firm downward slope within negative levels, while the RSI indicator offers a neutral-to-negative stance in bearish territory, indicating a moderate downward risk in the short term. Breach of the 1.3100 figure, however, will result in an increased bearish potential.

Support levels: 1.3095 1.3050 1.3010

Resistance levels: 1.3170 1.3215 1.3260

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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