On a day that has seen light activity on the GBP/USD pair due to a scanty economic news calendar, the GBP/USD pair is only slightly up by 0.11%. Barely supporting the Pound this Wednesday is the upbeat GDP m/m figure for May 2022, which came in at 0.5% (versus a consensus of 0.1%). This figure represents an increase above the -0.2% registered in April 2022.
Also helping to prop up the cable was better-than-expected Industrial and Manufacturing production data, which at 0.9% and 1.4%, respectively, beat both previous numbers and consensus estimates.
However, the slight gains made by the GBP/USD will face a test when the US Consumer Price Index data (m/m) for July 2022 is released by 12.30 pm GMT. The markets expect inflation at the consumer end of the spectrum to have risen from 1.0% to 1.1% (headline number). Core CPI is projected to drop from 0.6% to 0.5%. Higher-than-forecast figures could pressurize the pair and reverse any slight gains already made.
Trading volume on the GBP/USD is muted now, but expect significant volatility as the New York session kicks in.
The hammer candle bounced off the 1.18061 support needs a longer bullish candle to confirm the upside push and challenge the resistance at the 1.19991 price level. This is also the location of the wedge’s upper border.
A break above this double resistance confirms the pattern’s bullish outlook and opens the door for a measured move towards the 1.24167 resistance level. This measured move must break the 1.21673 (12 May low and 4 July high) and 1.22755 (6 May low and 20 June high) resistance barriers in the process. A further extension of the upside move will have 1.26546 to contend with, being the location of the 30 May high.
On the flip side, a lack of bullish momentum puts the 1.16566 support under pressure. A breakdown of this low seen on 25 March 2020 opens the door towards the 1.14538 support line. This is where the confluence of lows of 18-24 March 2020 are found. Any further declines will clear the way for the bears to seek additional harvest points at a new record low for the pair.