GBP/USD sticking to recent highs ahead of UK CPI reading

Pound buyers are enjoying some Brexit relief as PM May and the EU's Michel Barnier appear set to begin working together towards a solution.
UK inflation data due early Wednesday could derail buying opportunities.

Joshua Gibson FXStreet

The GBP/USD is testing into 1.3150 after slipping away from the current week's highs, but remains close by as improving Brexit sentiment bolsters the Sterling ahead of Wednesday's UK CPI reading.

Stiff-nosed Eurosceptics within Britain's Tory party are seeing Prime Minister Theresa May break significant ground in talks with the EU, with Brussels' head Brexit negotiator and PM May taking turns announcing that they are willing to reach fair middle ground in talks in order to avert a disorderly Brexit, and calls by the hardline Brexiteers to vote down any trade agreement that PM My secures with the EU, regardless of content, are largely being ignored for now as Pound traders experience some much-needed relief on Brexit headlines after months of stonewalling and unmoving negotiations.

Wednesday also features some potentially hard-hitting data, with the UK's inflation reading hitting at 08:30 GMT. The CPI for the year into August is expected to tick down slightly from 2.5% to 2.4%, and GBP bulls will be hoping for a showing that at least hits expectations in order to keep the GBP/USD in a decidedly long-sided stance heading into the latter half of the week.

GBP/USD levels to watch

The Sterling-Dollar matchup heads into Wednesday's London market session clattering into the week's highs, and as FXStreet's own Valeria Bednarik noted earlier: "(the GBP/USD) retains its bullish short-term stance according to technical readings in the 4 hours chart, as it continues developing above a firmly bullish 20 SMA. In the mentioned chart, the Momentum maintains its bullish slope above its 100 level, while the RSI is pulling back from overbought levels, not enough to suggest the current decline is poised to continue. The high of the day is critical, as the pair has there the 50% retracement of the 2016/18 rally, and a break above it should result in a steeper advance, particularly if supported by UK inflation data. Below 1.3120, on the other hand, the pair could correct lower, but bears won't take over unless 1.3045 gives up."

Support levels: 1.3120 1.3090 1.3045

Resistance levels: 1.3170 1.3210 1.3240

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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