GBP/USD was buoyed on Tuesday by a faster-than-expected UK inflation report, but trimmed gains after official data in the US showed imported inflation turned positive in March and Fed officials – Harker and Kaplan – talked about faster rate hikes.
Price action
Cable tested area around 1.4225 multiple times in early Europe before jumping to a high of 1.4348 after the UK data release. Demand for the greenback spiked in the NY session pushing the spot back to 1.4196 levels before making a recovery to 1.4270 levels.
Risk-on could support Pound
Risk-on sentiment in the financial markets is likely to keep the bid tone around GBP intact. Financial markets are cheering a rise in China’s imports, however, Europe and the global economy needs strong imports. As of now markets are ignoring a 13.8% drop in imports. Furthermore, commodity prices have reacted positively as well and that could keep FTSE happy. Consequently, the odds of GBP/USD moving to inverse head and shoulder neckline at 1.4352 levels are high.
Technicals – Rising trend line intact
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Rising trend line support is seen around 1.4225-1.4235 levels.
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A rebound from 1.4252 (50% of 1.4669-1.3835 + 50-DMA) could reinforce bullish move that began from NY session low of 1.42 and take the pair higher to 1.4330-1.4350.
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A violation at 1.4350 (inv. H&S neckline) could yield 1.4450-1.45 levels in next few days.
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On the other hand, a break from rising trend line support of 1.4225-1.4235 could see drop in demand for GBP, although intraday bullish invalidation is seen only below 1.42 levels, in which case support around 1.4120 levels stands exposed.
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