How to trade the UK inflation report with GBP/USD

UK inflation is central to the Bank of England and is set to have a big impact on the Pound.
The Market Impact Tool shows trading opportunities in both upside and downside surprises on this event.
The GBP/USD moved, on average, 39 pips in the 15 minutes after the data release and 96 pips in the following 4 hours

Yohay Elam FXStreet

Buying GBP/USD Scenario

Tradable Positive Trigger: +1.66 deviation (2.65%) [BUY Pair]
Key Resistance Level: 1.3615

1.3495 capped the pair on May 22nd and the area served as a support line earlier in the month. Further up, 1.3615 worked as resistance in May. Further up, 1.3710 was a swing low in early March.

If it comes out at higher than expected with a relative deviation of +1.66 or higher (2.65% or higher in actual terms), the pair may go up reaching a range of 38 pips in the first 15 minutes and 82 pips in the following 4 hours.

Selling GBP/USD Scenario

Tradable Negative Trigger: -2.47 deviation (2.28%) [SELL Pair]
Fundamental Support Level: 1.3393

If it comes out lower than expected at a relative deviation of -2.47 or less (2.28% or lower in actual terms), the GBP/USD may go down reaching a range of 40 pips in the first 15 minutes and 77 pips in the following 4 hours.

1.3393 was the low seen on May 21st, a new 2018 low. Further down, 1.3350 served in both directions in late 2017. The round 1.33 level in early December 2017.

GBP/USD Levels on the Chart

More data

The fall of annual inflation to 2.5% in March was one of the events that weighed heavily on the Pound as it lowers the chance of a rate hike. A repeat of the same level is expected for April and any deviation is likely to shake the pair.

See the full preview: BOE cheers inflation approaching the target with wages replacing Sterling as the key driver

In the last five releases, the GBP/USD moved, on average, 39 pips in the 15 minutes after the data release and 96 pips in the following 4 hours.

The previous release had a negative surprise of -2.24 in terms of relative deviation and the GBP/USD reached a 94 pip range in the first 15 minutes and a range of 122 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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