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British Pound Gains Ground Amid Rosy Outlook Ahead of CPI. Will USD Dominate Again?

British Pound Gains Ground Amid Rosy Outlook Ahead of CPI. Will USD Dominate Again?

Daniel McCarthy, Strategist

British Pound, GBP/USD, US Dollar, Hang Seng, Crude Oil - Talking Points

  • The British Pound was supported today ahead of CPI data tomorrow
  • APAC equities moved higher, joined by commodities and associated currencies
  • Inflation data might give hints on rate moves.Will GBP/USD resume the downtrend?

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The British Pound was boosted today in Asia to start the week as risk sentiment followed on from Wall Street’s positive lead on Friday. Despite this, GBP/USD remains in a downtrend like many other markets as overall US Dollar strength continues.

After today’s jobs data in the UK, they will see CPI tomorrow and it is anticipated to be a frightening 9.1% year-on-year according to a Bloomberg survey. The Bank of England will meet 4th August to decide on how much to hike rates.

The upbeat tone in the APAC session saw all the major stock indices gain. Hong Kong’s Hang Seng Index (HSI) climbed over 2.5% on the back of possible stimulus being flagged in China. US equity futures are pointing to positive start to their cash session.

Commodity markets are generally higher with the WTI crude oil futures contract trading near US$ 98 bbl and the Brent contract hovering around US$ 102 bbl. Gold is up slightly at US$ 1716 an ounce at the time of going to print.

The commodity linked currencies of AUD, CAD NOK and NZD are also up on the day so far.

Looking ahead, Canadian housing starts will be released, while in the US, Treasury International Capital (TIC) data will reveal capital flows into and out of the US.

US bank earnings will also be watched this week.

The full economic calendar can be viewed here.

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GBPUSD Technical Analysis

GBP/USD remains within a descending trend channel with potential for further bearish momentum. The price is below all period simple moving averages (SMA) and they all have negative gradients.

It has rallied in the last few sessions and if it crosses above the 10-day SMA, it might see a pause in bearishness.

Above there, resistance could be at the descending trendline which is currently at the same level as the 55-day SMA, 1.2286.

Further up, resistance might be at the prior highs of 1.2333 and 1.2407, the latter is just below the break point of 1.2411.

Support may lie at the recent low of 1.1760 of the descending trendline, currently dissecting at 1.1550.

GBPUSD CHART

Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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