GBPUSD trades lower following the UK CPI release with eyes on a key support zone

Fundamental Overview

The USD got a bit of a boost on Monday following the better than expected US PMIs although the gains were not widespread. We’ve also seen some bids in the greenback yesterday following the weak US Consumer Confidence where inflation expectations jumped to yet another high.

Overall, the market is still pricing between two to three rate cuts this year and the sentiment remains tentative as we approach the Trump’s “Liberation Day” on April 2^nd.

On the GBP side, the UK CPI today missed expectations almost across the board although services inflation remains sticky around 5% which is what the BoE is more concerned with. The market is now seeing higher chances of a rate cut at the upcoming meeting though. We still have another inflation report before the next BoE decision, so a rate cut is not a done deal.

GBPUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that GBPUSD eventually pulled back into the trendline as buyers couldn’t push above the 1.30 handle. We can expect the buyers to lean on the trendline with a defined risk below it to position for a rally into the 1.31 handle next. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop into the next major trendline around the 1.27 handle.

GBPUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see more clearly the bullish setup around the 1.2865 level where we have the trendline and the swing level where the bullish momentum started to wane from. This looks like a strong support zone where the buyers can lean onto to position for a continuation of the uptrend. If the price were to break lower though, the sellers will likely regain control and look for a push towards the next trendline.

GBPUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a downward trendline now defining the bearish momentum on this timeframe. If we get a pullback into it, we can expect the sellers to step in with a defined risk above it to position for a break below the 1.2865 support zone. The buyers, on the other hand, will look for a break higher to increase the bullish bets into the 1.31 handle next. The red lines define the average daily range for today.

Upcoming Catalysts

Tomorrow we get the latest US Jobless Claims figures, while on Friday we conclude the week with the UK Retail Sales and the US PCE report.