GBPUSD Bullish on Hot UK InflationGBPUSD
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Strategy Bullish
The British pound held firm around $1.28, staying close to its peak of $1.2848 recorded in June 16th, as hotter-than-expected inflation numbers raised anticipation among investors that the Bank of England would respond to the persistent inflationary pressures by implementing further interest rate hikes. In May, the headline inflation rate remained unchanged at 8.7%, slightly above the projected 8.4% and surpassing the policymakers' target of 2%. Additionally, the core inflation rate accelerated to 7.1%, reaching its highest level since March 1992. The Bank of England will likely deliver a 13th consecutive interest rate hike on Thursday, bringing borrowing costs to fresh 15-year highs. Markets now price another 150 basis points of hiking for a peak at 6%.
GBPUSD broke resistance zone 1.2464and closed above 1.2697
GBPUSD made since March14th2023 2consequent HH AND HL. The next HL must close above 1.2382
otherwise the market structrue will not be valid anymore and the danger of bearish structure will be created.
If the bullish market structure continues then 2 bullish scenarios are potentially possibel(See green arrows
Trendomat and Buy Sell pressure are green what indicates continuation of the bullish trend
$1.29 in the Hands of UK Inflation and Powell
With the Bank of England set to deliver its June interest rate decision on Thursday, today’s inflation numbers will materially influence the Bank’s outlook on inflation, the UK economy, and monetary policy.
To date, inflation has remained sticky. With a more resilient-than-expected UK economy, the markets expect a hawkish 25 basis-point interest rate hike. An annual inflation rate below 8% could support a BoE pause after the summer.
Economists forecast the UK annual inflation rate to soften from 8.7% to 8.4% in May. Investors will need to look beyond the headline figure, with food price inflation and core inflation needing consideration.
However, wage growth remains a bugbear that would also need to slow to give the doves more voice.
With inflation in the spotlight, investors should track Bank of England commentary for clues on monetary policy and the economic outlook. However, no Monetary Policy Committee members on the calendar to speak, leaving chatter with the media to move the dial.
Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The GBP/USD sat above the 50-day EMA, currently at $1.26889. The 50-day EMA pulled further away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.
A hold above the S1 ($1.2716) and the 50-day EMA ($1.26899) would support a breakout from R1 ($1.2810) to target R2 ($1.2855). However, a fall through S1 ($1.21716) and the 50-day EMA ($1.20097) which is on the same time the Monthly average price would bring S2 ($1.19885) into view. A fall through the 50-day EMA would send a bearish signal.
Resistance & Support Levels
R1 – $
1.2810
S1 – $
1.21716
R2 – $
1.2855
S2 – $
1.19885
R3 – $
1.2948
S3 – $
1.16547
A breakout from the Tuesday high of $1.28067 would signal an extended breakout session. However, the Pound would need the UK inflation numbers and Fed Chair Powell to support a bullish session.
In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2855 and resistance at $1.29. The Third Major Resistance Level sits at $1.2948.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2716 in play. However, barring a UK inflation-fueled sell-off, the GBP/USD should avoid sub-$1.2650. The Second Major Support Level (S2) at $1.2668 should limit the downside. The Third Major Support Level (S3) sits at $1.2575.
