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British Pound (GBP) Forecast: Cable Testing Key Levels Ahead of UK CPI

British Pound (GBP) Forecast: Cable Testing Key Levels Ahead of UK CPI

Warren Venketas, Analyst

GBP/USD TECHNICAL FORECAST: MIXED

  • Focus shifts to UK inflation data next week.
  • Can cable buck the trend and push above key resistance?
  • IG Client Sentiment: Bullish
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CABLE FUNDAMENTAL BACKDROP

The Bank of Englandraised rates by 25bps this week in a more cautious approach due to the war in Ukraine. With UK inflation data scheduled next week (with expectations of a marked increase), sterling could receive some bids if actual data releases in line or above forecasts.

British Pound (GBP) Forecast: Cable Testing Key Levels Ahead of UK CPI

Source: DailyFX Economic Calendar

The dollarhas allowed for GBP/USD to remain buoyant amidst a comparatively dovish BoE but post-inflation could present significant downside risks for the pound.

GBP/USD TECHNICAL ANALYSIS

GBP/USD DAILY CHART

British Pound (GBP) Forecast: Cable Testing Key Levels Ahead of UK CPI

Chart prepared by Warren Venketas, IG

Technical analysis on the daily GBP/USD chart shows the week’s bullish price action limited by the 38.2% Fibonacci level at 1.3164 (Fibonacci levels taken from March 2020 lows to May 2021 highs). The temporary relief is under pressure from the broader downtrend since late February 2021. The overextended dollar has partly contributed to a pound recovery against USD and still has some room to run in the near-term. I will be looking for a daily candle close above the 38.2% Fibonacci level for a further bullish push however, my longer-term outlook remains skewed towards the dollar.

Key resistance levels:

  • 1.3273
  • 20-day EMA (purple)
  • 1.3164 – 38.2% Fibonacci

Key support levels:

  • Channel support 1 (black)
  • 1.3000

IG CLIENT SENTIMENT SUGGESTIVE OF SHORT-TERM UPSIDE

IG Client Sentiment Data (IGCS) shows retail traders are currently LONGon GBP/USD, with 71% of traders currently holding long positions (as of this writing). At DailyFX we typically take a contrarian view to crowd sentiment however recent changes in net long and short positioning favor a bullish bias.

Contact and follow Warren on Twitter: @WVenketas

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

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