GBP/USD outlook: Cable dips on softer than expected UK data, focus shifts on US inflation

Slobodan Drvenica Windsor Brokers

GBP/USD

Cable fell 0.35% in immediate reaction to softer than expected UK inflation numbers in July.

Although the BoE expected inflationary pressure to rise after CPI stayed at 2% target in past two months, weaker than expected July figure adds to expectations for more rate cuts that deflated sterling.

Fresh dip emerged after repeated failure to clear Fibo resistance at 1.2854 (50% of 1.3044/1.2664, reinforced by daily Kijun-sen), although facing increased headwinds from supports at 1.2825/09 (20DMA / broken Fibo 38.2%).

Firm break of these levels to generate fresh bearish signal and open way for deeper pullback.

Overbought Stochastic and rising 14-d momentum still in the negative territory support the notion, though positive signals from MA’s in bullish setup and rising daily cloud underpinning the action, partially offset downside threats.

Look for stronger direction signals on breach of 1.2800 support zone (negative) or lift above upper pivots at 1.2854/70 (positive).

All eyes are on US July inflation report (due later today) which is expected to shed more light on Fed’s next steps on monetary policy.

Annualized CPI is expected to remain at 3% in July, while monthly inflation and core figure (excluding the most volatile components) I s expected to tick higher.

Markets may show stronger reaction on any divergence of July figure from forecasted levels, while less volatility could be expected if CPI comes overall in line with expectations.

Res: 1.2854; 1.2870; 1.2899; 1.2954.
Sup: 1.2826; 1.2809; 1.2768; 1.2734.

Interested in GBP/USD technicals? Check out the key levels

1. R3 1.3013
2. R2 1.2943
3. R1 1.2903
PP 1.2833
1. S1 1.2793
2. S2 1.2723
3. S3 1.2683

Author

Slobodan Drvenica

Windsor Brokers

Industry veteran with over 22 years’ experience, Slobodan Drvenica joined Windsor Brokers in 1995 when he was an active trader for more than 10 years, managing the trading desk and own account departments.

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