How to trade the UK inflation data with GBP/USD

The UK inflation report is critical for the Bank of England and always has a significant impact on the Pound.
The Market Impact Tool shows trading opportunities in both upside and downside surprises on this event.
The GBPUSD moved, on average, 9 pips in the 15 minutes after the data release and 32 pips in the following 4 hours.

Yohay Elam FXStreet

Tradable figure: UK Average Earnings including Bonus (3Mo/Yr) (United Kingdom)

Buying GBP/USD Scenario

Tradable Positive Trigger: +1.24 deviation (2.64%) [BUY Pair]
Key Resistance Level: 1.3400

This time, if it comes out at higher than expected with a relative deviation of 1.24 or higher (2.64% or higher in actual terms), the pair may go up reaching a range of 31 pips in the first 15 minutes and 102 pips in the following 4 hours.

1.3400 is a round number and also the swing low of May 21st. 1.3450 capped the pair in early June and also held it down in late May. The found 1.3500 level was also a low point in mid-May.

Selling GBP/USD Scenario

Tradable Negative Trigger: -1.10 deviation (2.37%) [SELL Pair]
Fundamental Support Level: 1.3300

If it comes out lower than expected at a relative deviation of -1.10 or less (2.37% or lower in actual terms), the GBPUSD may go down reaching a range of 44 pips in the first 15 minutes and 95 pips in the following 4 hours.

1.3345 served as support in mid-June. 1.3300 was not only a round number but also worked as a cushion on May 23rd. Further down 1.3200 is the 2018 low.

GBP/USD Levels on the Chart

More data

The Bank of England refrained from raising rates in its last decision also due to falling inflation. However, it kept its intentions to hike this year. A lot depends on inflation.

More: UK inflation Preview: Inflation set to pick up as fuel prices feed through

In the last five releases, the GBPUSD moved, on average, 9 pips in the 15 minutes after the data release and 32 pips in the following 4 hours. The previous release had a negative surprise of -0.86 in terms of relative deviation and the GBPUSD reached a 9 pip range in the first 15 minutes and a range of 21 pips 4 hours thereafter.

Follow the publication of the figure on the economic calendar. Watch out for the data from the Market Impact tool, projecting the potential price changes according to the deviation. Here is the Market Impact Studies Users Guide.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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