GBP/USD Forecast: Pound could extend correction above 1.1550

GBP/USD has managed to erase a portion of Tuesday's losses.
Core inflation in the UK edged higher to 6.3% on a yearly basis in August.
Wall Street's main indexes remain on track to open higher.

Eren Sengezer FXStreet

GBP/USD has gathered recovery momentum and climbed toward 1.1550 after having declined below 1.1500 earlier in the day. The pair needs to clear 1.1550 in order to attract bulls.

The data published by the UK's Office for National Statistics (ONS) reported on Wednesday that the annual Consumer Price Index (CPI) declined to 9.9% in August from 10.1% in July. The Core CPI, however, which excludes volatile food and energy prices, rose to 6.3% from 6.2%.

According to Reuters, UK interest rate futures point to a 79% chance that the Bank of England will raise its policy rate by 75 basis points to 2.5% on September 22 after the inflation data.

On Tuesday, hot inflation figures from the US triggered an impressive rally in the US Dollar Index (DXY) and forced GBP/USD to suffer large losses.

Early Wednesday, US stock index futures are up between 0.5% and 0.6% on the day. In case risk flows start to dominate the financial markets in the second half of the day, the greenback could face additional selling pressure. At the time of press, the DXY was down 0.2% on the day at 109.60.

The US economic docket will feature the August Producer Price Index (PPI) data. On a yearly basis, PPI is forecast to decline to 8.8% from 9.8% in July. Although investors are unlikely to overreact to producer inflation data, an unexpected increase in PPI could help the dollar regather strength and limit GBP/USD's upside.

GBP/USD Technical Analysis

On the four-hour chart, the Relative Strength Index (RSI) indicator rose toward 50 during the European session, suggesting that sellers are moving to the sidelines. GBP/USD is trading within a touching distance of 1.1550, where the 50-period SMA is located. In case the pair flips that level into support, it could push higher toward 1.1600 (Fibonacci 23.6% retracement of the latest downtrend, 20-period SMA), 1.1640 (100-period SMA) and 1.1700 (psychological level).

On the downside, 1.1500 (psychological level) aligns as key support before 1.1450 (static level) and 1.1400 (end-point of the downtrend, psychological level).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD bulls regain control above 0.6950 amid USD retreat

AUD/USD regains traction and extends the previous day's bounce from the weekly low, aiming for 0.7000 in Asia on Friday. The overnight pullback in US bond yields keeps the US Dollar below an 18-month high, which in turn offers some support to the pair. Meanwhile, hawkish RBA expectations also keep the major underpinned.

USD/JPY holds gains near 158.00 after Japan's weak Household Spending data

USD/JPY clings to gains around 158.00 after data showed on Friday that Japan's Household Spending fell for the ninth straight month, undermining the Japanese Yen. Meanwhile, the US Dollar remains depressed as the overnight fall in US bond yields counters a hawkish Fed and geopolitical uncertainties, could cap any downside in the pair.

Gold remains range-bound below $4,200

Gold has given up some ground after an initial bullish attempt to reach weekly highs, returning to below the $4,200 mark per troy ounce on Friday. The US Dollar’s strong upside momentum, combined with rising US Treasury yields across the curve, seems to keep further gains in the yellow metal under scrutiny.

Has Bitcoin really escaped the macro forces it was built to fight?

Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?

The Euro is not the sick man of Europe. France's bond market is

EUR/USD remains under pressure, near the 17-month low of 1.1161 reached on Monday. The pair has lost more than 7% since its yearly peak, as concerns over France's public finances increasingly weigh on the single currency. But behind the weakness of the Euro (EUR), the problem does not necessarily lie with the European economy as a whole.