GBPUSD Bears are back after UK Inflation Data – US Retail Sales on Focus
GBP/USD Fundamental Analysis
Today, GBP/USD exchange rate is lower after the release of reducing UK Inflation data and the rising US dollar against the basket of major currencies.
US CPI is still High
On Tuesday, February 14, US statistics showed that inflation is still strong. The annual Core CPI was slightly higher than the market forecast of 5.5%, coming in at 5.6% in January as opposed to 5.7% in December. The Core CPI increased by 0.4% monthly.
Following the release of the CPI data, the benchmark 10-year US Treasury bond yield increased to its highest level, around 3.8%, in more than a month. It increased the US dollar strength and made it impossible for the GBP/USD to avoid the bearish influence.
UK CPI showing signs of easing
The UK Consumer Price Index (CPI), reported on Wednesday, February 15, decreased to 10.1% YoY in January as opposed to the 10.3% market expectations and the 10.5% earlier readings. In addition, Core CPI, which does not include seasonal commodities like food and energy, came in at 5.8% YoY as opposed to the 6.3% prior and anticipated 6.2%.
The Bank of England (BoE) may delay the rate of tightening its monetary policy as a result of the report. It was bearish for the British Pound since it indicates signals of reducing inflationary pressure.
Therefore, the UK-CPI report’s softer-than-expected inflationary results have caused the GBP/USD to fall.
Upcoming Retail Sales and Empire State Manufacturing Index data
The US Retail Sales and Industrial Production numbers for January, and the NY Empire State Manufacturing Index for February, will all be on the schedule for US economic news in the second part of the day.
The possibility that the Fed might increase its policy rate by at least 25 basis points (bps) in May following a 25 bps increase in March is currently over 80%.
Therefore, GBP/USD traders must wait for the upcoming data releases from the US Fed for clear signals after observing the early market response to the important UK data.
GBP/USD Technical Analysis
The H2 chart outlook of the GBP/USD forex pair shows that bears are in control of the market. The selling pressure is trying to drag the prices below the ascending channel. The 100-Day Simple Moving Average line has also cut the other 50-Day and 20-Day SMAs from above, signalling the bearish pressure.
Meanwhile, the Relative Strength Index (RSI) is also moving downside below the mid-level with a reading of 37. It also means the price is falling towards the oversold level. Furthermore, the Stochastic Oscillator is already at the oversold level, backing the bearish trend signal. The Moving Average Convergence and Divergence (MACD) red signal line with a downward slope above the histograms is also flagging selling pressure. In short, the technical Indicators are all confirming a strong bearish trend ahead.
The lower band of the ascending channel is acting as immediate support for the currency pair at 1.20657. Any break below this level would increase the downfall momentum below the 1.20300 level, and the next stop will be at 1.19748. In the bullish scenario, the pair could see recovery if it breaks above the initial resistance at 1.21058. GBP/USD will see the next resistance at 1.21795; from there, it could reverse its trend to the downside again.
Additionally, the Upcoming US Retail Sales and Manufacturing Index will keep the volatility alive in GBP/USD pair in the next American Trading Hours.
GBP/USD Daily Technical Levels:
| Support | Resistance |
| 1.2106 | 1.2253 |
| 1.2038 | 1.2334 |
| 1.1958 | 1.2401 |
Pivot Point: 1.2186
