Cable in the Pound Seat Ahead of CPI, BoE

GBP/USD news and analysis

• The GBP/USD weekly chart reveals another long-term bullish potential
• The cable’s bullish stance is likely to continue ahead of next week’s CPI and BoE meeting
• Key risk events: UK CPI and Bank of England interest rate decision
• The analysis in this article is used chart patterns and key Support and resistance levels. For more information visit our comprehensive website Educational library

The GBP/USD weekly chart reveals more bullish possibilities in the long term

Looking at the GBP/USD weekly chart, the bulls have enjoyed a solid 3 weeks after bouncing off support around the 50% retracement of the major 2021-2022 sell-off at 1.2295. This week, the bullish price action continues its upward movement, and it is currently trading above a rising wedge formation and even breaching the resistance area around 1.2700. In case the Bank of England (BoE) presents a more hawkish view than expected, the pound is likely to remain supported. However, risks to the downside remain as the market currently expects up to another 130bps in tightening early next year, something the BoE has expressed concern about in the past. A pessimistic 25bps rally could release some bullish related steam, seeing Cable drift slightly lower towards upward sloping trendline support (former resistance).

GBP/USD weekly chart

Source: TradingView, prepared by Richard Snow

GBP/USD Technical Considerations Ahead of CPI and BoE Release

The daily chart helps to display more recent developments in the pair as the price action closed above the resistance area in yesterday’s trading, while maintaining this level until Friday. The next level of interest to the upside is located at the psychological level of 1.3000. On the downside of the coin, 1.2700 becomes immediate support, followed by 1.2585. The RSI indicates that the pair is on the verge of overbought territory, which increases the chances of a pullback before the main risk event next week.

Daily chart of the British pound / US dollar

Source: TradingView, prepared by Richard Snow

Risk events for the next week

On Friday, Bullard is due to appear, though he is running a presentation, so there is little expectation that he is likely to send a hawkish wave across the market as he has in his past speeches. Federal Reserve Chairman Christopher Waller is also scheduled to appear today as the day and week rounds out preliminary data from the University of Michigan Consumer Survey in the US.

Next week is largely focused on the United Kingdom, with CPI on wednesday and Bank of England Interest rate decision on Thursday as markets expect a 25bp hike with an outside chance of even a 50bp hike. Higher average UK earnings and broad price pressures have proven resilient in the face of tighter financial conditions, but inflation is expected to decline sharply for the rest of the year as fundamental effects take effect and lower energy prices.

Finally, Jerome Powell is scheduled to appear before the Senate Banking Committee to testify on recent monetary policy decisions. Periods of stress tended to reveal themselves in the past despite the Fed reassuring the markets that the banking sector was stable. Talk of potential “mergers” could raise concerns, but the two-day hearing is largely expected to go on as normal.

– Posted by Richard Snow for DailyFX.com

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