GBP/USD: Bulls look to test 1.3050 ahead of UK CPI

GBP/USD looks to extend the bounce towards 1.3050 ahead of the UK CPI report, as broad-based US dollar weakness and bullish technical set up underpin the sentiment around the spot.   

As for Wednesday’s trading so far, the cable is consolidating the bounce from three-week lows of 1.2954 below the 5-DMA at 1.3034. The cautious market mood ahead of the US-China phase trade deal details release and thereafter the signing ceremony remains a drag on the US dollar across its main competitors.

Meanwhile, the latest comments from the UK PM Johnson, denying Scottish PM Sturgeon’s request to hold another Scottish independence referendum, also keeps a check on the pound’s recovery, as it further fuels Hard Brexit concerns. Further, poor UK GDP data combined with increased BOE dovish expectations could continue to weigh.

Looking ahead, the pair risks further gains, as suggested by the short-term technical set up. “To start with, the flag breakout seen on the 15-minute chart indicates the minor pullback from the overnight high of 1.3033 has ended and the rally from 1.2975 has resumed. The breakout has opened the doors for 1.3080 (target as per the measured move method)”, Omkar Godbole, FXStreet’s Analyst explains.

Moreover, a beat on the UK annualized inflation figures could bolster the GBP/USD recovery. However, the major is likely to be influenced by the USD dynamics, in the face of the US-China phase one trade deal signing due later today at 1630 GMT.

GBP/USD Technical levels to consider