GBP/USD: waiting for the inflation report

FX BAZOOKA analyst Kira Iukhtenko

The GBP/USD currency pair is trading under pressure on Monday, capped at $1.6430. The technical picture improved over the past trading week: buyers didn't not let the cable fall below the key $1.6250 support. The pair has formed a short-term rising channel, retracing more than 38.2% Fibo from that level. 

However, it is very early to speak about the uptrend resumption. The upcoming BoE Quarterly Inflation Report (Wednesday) creates significant bearish risks for the pair. Governor Carney is widely expected to announce the "forward guidance" update as the BoE is unable to deliver a rate cut in the near future. The two most probable BoE steps are to lower the jobless rate threshold from 7.0% or to widen the number of economic indicators to focus on.

I would recommend to hold short GBP/USD positions as long as it holds below the $1.6515 resistance. Rise above here could confirm that the current cable's rebound is not just a correction. The major resistance lies at $1.6630 (200-month MA). In my view, for now the bulls do not have enough energy to break above that level. Decline below $1.6250 would open the way for further GBP weakness with a medium-term target of $1.5850. 

Chart. H4 GBP/USD

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