GBPUSD Holds On to Support on Dismal US CPI; UK CPI to Fuel Its Rally?

GBPUSD Benefits from US CPI

Unlike the euro, the pound benefitted from the US CPI report in yesterday’s trading and helped GBPUSD find a bottom at 1.2953. According to the Bureau of Labor Statistics, the headline CPI figure for December came in as expected at 0.2%. On the other hand, excluding volatile items, the core CPI figure for the month only printed a measly 0.1% uptick. Following the report’s release, the currency pair traded steadily higher and finished at 1.3017, 30 pips higher from its opening price.

GBPUSD continued to trade higher in today’s Asian session. However, with the UK CPI report about to be released, can it hold on to its gains?

UK CPI Due Today

At 9:30 am GMT, the headline inflation figure for December is anticipated to post a 1.5% uptick, Meanwhile, the core reading is seen at 1.7%. This report will be closely-watched by market participants especially because the BOE is tilting towards being more dovish. Remember that BOE Member Tenreyro has already expressed her intent to vote for a rate cut soon. A better-than-expected figure would be bullish for the pound as it could keep her and other members from easing soon.

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GBPUSD Outlook

On the 4-hour time frame, we can see that after it bounced off the long-term rising trend line (which I pointed out yesterday), GBPUSD seems to have already broken trend line resistance too. There is near-term resistance at the 100 SMA and 200 SMA around 1.3075, however, a bullish close above it could indicate a bigger rally ahead. The next ceiling could be at 1.3175 where GBPUSD peaked on January 7. On the other hand, if resistance holds, we could see the currency pair fall back to yesterday’s lows at 1.2970.

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