- Yesterday's 'Inside day' candle shows potential trend reversal.
- 'Inside day' needs bullish follow-through.
- Focus on UK CPI.
The GBP/USD pair created an inside day candle yesterday, i.e. the spot traded within the high and low of Friday. The inside day candle often marks trend reversal, however, only a bullish follow-through (today) would confirm the decline from the recent high of 1.4345 has ended at Feb. 9 low of 1.3765.
Also, it is worth noting that inside candle has appeared at the key 61.8 percent Fibonacci retracement of the rally from 1.3458 (Jan. 11 low) to 1.4345 (Jan. 25 high).
That said, the positive follow-through to yesterday's inside day candle would likely require a better-than-expected UK CPI print. The data due at 09:30 GMT today is expected to show the cost of living dropped 0.6 percent month-on-month in January. The decline should not come as a surprise as prices tend to drop in the post-Christmas period. Further, the core CPI, which strips out volatile items, is seen rising 2.6 percent year-on-year vs. 2.5 percent in December. An uptick in core CPI could be read as a sign that demand-pull inflation is on the rise and hence may yield rally in GBP.
On the other hand, a weaker-than-expected core CPI could push cable below 1.3797 (31.8 percent Fibonacci retracement of the rally from 1.3458-1.4345).
GBP/USD Technical Levels
As of writing, the pair is trading at 1.3845. Momentum studies indicate bearish setup - 5DM, 10DMA are sloping downwards. So a break below 1.3797 (61.8% fib R of 1.3458-1.4345) could yield a deeper sell-off to 1.37 (psychological level) and 1.3687 (upward sloping 50-day MA). On the higher side, a move above 1.3876 (previous day's high) would expose resistance at 1.3902 (50% Fib R of 1.3458-1.4345), above which major hurdle is seen at 1.3960 (weekly 5-MA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.