GBP/USD forecast: Post-CPI breakout holds near 1.36 as Fed cut odds hit 95.8% [Video]
- Post-CPI breakout turns FVG invalidation into bullish momentum, with GBP/USD holding near 1.36.
- Dovish U.S. CPI and 95.8% Fed rate-cut odds drive USD weakness, boosting sterling.
- Technical focus on 1.35079–1.35558 H4 FVG as key pivot for either continuation to 1.37+ or breakdown.
![GBP/USD forecast: Post-CPI breakout holds near 1.36 as Fed cut odds hit 95.8% [Video]](https://editorial.fxsstatic.com/images/i/gbp-usd-001_XtraLarge.jpg)
Post-CPI breakout: From FVG invalidation to multi-week highs
Sterling has extended its bullish momentum against the U.S. dollar, trading below the 1.36 level after a powerful post-CPI surge. The rally unfolded in a sequence that blended liquidity concepts with macro fundamentals, particularly, CPI as the catalyst for upside.
Earlier this week, we outlined an H1 Fair Value Gap (FVG) between 1.34450–1.34512 as a possible bounce zone.
Price initially reacted positively, but the setup was invalidated when sellers pushed through the lower boundary. This flush served as a liquidity sweep, taking out stops below the recent range and clearing out weak longs.
Instead of collapsing, GBP/USD pivoted sharply after the July U.S. CPI release, which acted as the fundamental catalyst for the reversal. The sweep-and-reverse pattern triggered a burst of buying, sending price into sustained upside momentum and through key resistance levels.
This invalidation is a classic move as upside potential is still capped as the markets await CPI results.
CPI results and dovish impact
The July U.S. CPI release on Tuesday, 12 August 2025 at 20:30 (GMT+8) provided the fundamental spark for GBP/USD’s breakout. The data came in mixed but leaned dovish overall:
| Indicator | Forecast | Previous | Actual | Impact |
|---|---|---|---|---|
Core CPI YoY | 3.0% | 2.9% | 3.1% | Slightly above forecast but overshadowed by headline miss |
Headline CPI YoY | 2.8% | 2.7% | 2.7% | Below forecast, sign of easing inflation pressure |
Core CPI MoM | 0.3% | 0.2% | 0.2% | Softer than expected |
Headline CPI MoM | 0.2% | 0.3% | 0.3% | In line, no surprise |
- The headline CPI YoY miss at 2.7% vs. 2.8% forecast reinforced the narrative that inflationary pressures are cooling.
- Slightly hotter Core CPI YoY was overshadowed by softer MoM readings.
- The overall tone was dovish, prompting markets to price in a near-certain September Fed rate cut.
September Fed rate cut odds
Following the CPI release, CME FedWatch Tool shows a 95.8% probability, higher than the previous of 94.2% of a rate cut at the September 2025 FOMC meeting, with the target range expected to move from 425–450 bps down to 400–425 bps. Only 4.2% of market pricing remained for a deeper cut to 375–400 bps.
Impact on GBP/USD
- A high-probability cut weakens USD appeal, especially against currencies backed by more cautious central banks like the BoE.
- Risk-on flows gained momentum as easing expectations reduced dollar demand.
- GBP/USD rallied aggressively as the rate differential outlook shifted further in sterling’s favor.
Technical outlook: Trading firmly at multi-week highs
GBP/USD is consolidating just under the 1.36 level, acting as a psychological resistance after a strong CPI-driven breakout. The move has left behind an H4 Fair Value Gap (FVG) between 1.35079–1.35558 that now serves as key near-term support.
Bullish scenario
GBP/USD is consolidating below 1.36 resistance after its CPI-driven rally, with the H4 Fair Value Gap (1.35079–1.35558) acting as the key decision zone for further upside.
Three main bullish pathways are in play
- Breakout: If buyers maintain control without a deeper pullback, a clean break and close above 1.36 could trigger immediate continuation toward 1.3700, with further extension to 1.3750-1.380 if momentum holds.
- Pullback: Price may retrace into the H4 FVG (1.35079–1.35558), using it as a launchpad for the next impulsive leg higher. A bullish reaction from this zone - especially if aligned with intraday displacement - would add confluence for a push through 1.3618.
- Deeper Pullback: Test deeper liquidity pockets within the H4 FVG (1.35079–1.35558) and potentially the Order Block zone near 1.35238–1.35157 (also near the 61.8%–70.5% retracement cluster).
Bullish invalidation
A sustained breakdown below 1.3500 would weaken this bullish structure and risk a retest of the 1.3443–1.3491 demand zone.
Upside Targets:
- 1.3618 – Breakout trigger level.
- 1.3700 – First major target.
- 1.3788 – 2025 high.
Bearish scenario
If GBP/USD fails to sustain buying momentum and decisively rejects from the 1.355 support area, price could trigger a deeper corrective leg toward and through the 1.35079–1.35558 support cluster.
Bearish breakdown path
- Price sells off from resistance, retracing through the upper Fibonacci levels and entering the H4 Fair Value Gap zone.
- The 1.35079–1.35558 area fails to hold as support, leading to a breakdown into the Order Block around 1.349–1.350.
- Sellers maintain control, converting the Order Block into resistance.
- This shift could open a path for a sustained drop toward:
- 1.348 – previous breakpoint.
Why this scenario is critical
- A close below 1.350 would signal that bullish structures have been compromised.
- The loss of both the H4 FVG and Order Block would confirm that institutional demand has been absorbed, strengthening the bearish bias.
Author
Jasper Osita
Independent Analyst
Jasper has been in the markets since 2019 trading currencies, indices and commodities like Gold. His approach in the market is heavily accompanied by technical analysis, trading Smart Money Concepts (SMC) with fundamentals in mind.
