Who’s ready to play a potential opposite trend?
I am looking forward to GBP/USD testing the bottom of its descending channel before issuing US Core PCE Price Index for April.
Better keep your eyes on these levels if you want a bounce or breakout.
GBP/USD 15-minute forex Planned by TV
Cable formed lower highs and lower lows connected by a downward channel visible on its short-term timeframes.
The pair is currently hanging at the bottom of the channel, and is still deciding whether to pull back again or head for a sharper decline.
Technical indicators seem to suggest that support is more likely to be broken than held. 100 SMA is below 200 SMA to confirm the presence of negative reactions while stochastic is heading south.
If that happens, GBP/USD could fall to the next floor at S1 (1.2320) or all the way to S2 (1.2280).
However, the oscillator is already falling in the oversold territory to indicate exhaustion among the sellers. A turn to the upside and a move north could indicate that the buyers are regaining the upper hand.
Market players can take cues from how the US core PCE price index for April turned out, as this report is said to be the Fed’s preferred inflation measure.
Now the FOMC has refrained from giving strong hints about stopping interest rate hikes at upcoming policy meetings, with Fed Chair Powell reiterating that their decisions depend on the data.
However, any sign of weakening price levels may be enough to convince dollar traders that the US central bank is likely to sit in hand next month.
Also keep in mind that the dollar could be even more shaky if debt ceiling talks stall this week, especially as the June 1 deadline is fast approaching.
In contrast, the Bank of England may have no choice but to raise borrowing costs again in its next policy decision since the latest batch of UK CPI figures reflected stubborn inflationary pressures.
If channel support holds as a floor, GBP/USD could rebound to the top of the channel that lines up with R1 (1.2440) or at least to the mid-channel area that coincides with the pivot point (1.2400).
Average daily volatility for cable Close to 90 pips puts these potential upside targets within reach if we see a large negative surprise to the April core PCE consensus of 0.3% and/or a return of anti-dollar sentiment.
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