How to trade the UK Inflation with GBP/USD

Buying GBP/USD Scenario

• Tradable Positive Trigger: +0,78 deviation [BUY Pair]

• Key Resistance Level: $1.4345

If it comes out at higher than expected with a deviation of +0,78 or higher, the pair may go up reaching a range of 31 pips in the first 15 minutes and 103 pips in the following 4 hours.

The January 25th high of $1.4345 was only recently broken. The $1.4376 level seen on April 17th is the highest since June 2016, when the EU Referendum sent it tumbling down. The pre-referendum gap level of $1.4435 is next.

Selling GBP/USD Scenario

• Tradable Negative Trigger: -0,74 deviation [SELL Pair]

• Key Support Level: $1.4245.

If it comes out lower than expected at a deviation of -0,74 or less, the GBP/USD may down reaching a range of 42 pips in the first 15 minutes and 100 pips in the following 4 hours.

$1.4245 was the March peak. Further below, we find $1.4150 which was a mid-February high, followed by $1.4070, a late-March low.

GBP/USD Levels on the Chart

More data

In the last five releases, the GBP/USD moved, on average, 34 pips in the 15 minutes after the release and 92 pips in the 4 hours after the release.

The previous release had a surprise of -1.34 in terms of deviation, and the GBP/USD reached a range of 26 pips in the first 15 minutes and 68 pips in the following 4 hours.

The Bank of England has an inflation target of 1-3%. After inflation reached the highs and the Bank raised rates, more rate hikes are on the cards. However, if inflation continues sliding, it may give Mark Carney and co. second thoughts.

UK CPI Preview: With Sterling higher inflation worries wane as rate hike nears

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.