Navigating Sterling's Path Amid US CPI and UK GDP: Technical Insights
As significant market events unfold, particularly the US CPI and UK GDP releases, sterling pairs find themselves at a pivotal juncture.
1/29/20242 min read
Navigating Sterling's Path Amid US CPI and UK GDP: Technical Insights
Introduction:
As significant market events unfold, particularly the US CPI and UK GDP releases, sterling pairs find themselves at a pivotal juncture. GBP/JPY exhibits a bullish stance, GBP/USD consolidates amidst uncertainty, and EUR/GBP's triangle pattern hints at a potential bearish inclination. Traders brace for potential market shifts as these critical data points loom on the horizon.
US CPI and Future Inflation Pressures:
Anticipation builds around the US CPI for December, with expectations of a marginal rise in the headline measure and a dip in core inflation. Ongoing shipping disruptions in the Red Sea may influence future CPI figures, reflecting higher security and rerouting costs. However, a potentially stronger dollar from hotter inflation seems unlikely, given the prevailing disinflation trend in the US.
UK GDP Outlook:
As the spotlight turns to UK GDP, November's expectations paint a somber picture, with projected anaemic growth and a three-month average possibly turning negative. The economic landscape suggests challenges, and the upcoming data release may shape sentiments regarding the resilience of the UK economy.
GBP/JPY: Bullish Momentum and Technical Analysis:
GBP/JPY displays a robust performance, particularly since testing the 200 SMA and the 78.6% Fibonacci retracement of the 2015-2016 decline. Fundamentally, the yen's policy reversal potential wanes, validating the bullish advance with a strong green candle. Prior resistance at 184.00 transforms into support, while attention shifts to the 2015 level of 188.80 as potential resistance.
GBP/USD: Consolidation and Potential Momentum Shift:
GBP/USD stands at a crossroad, consolidating with higher highs and higher lows. The pair lacks clear momentum, with resistance at 1.2770 hindering progress towards the late December swing high. The recent 'golden cross' on the 50 and 200 SMA indicates a potential bullish trend, but a softer CPI print or a lack of momentum could lead to a retest of support at 1.2585.
EUR/GBP: Triangle Pattern and Mean Reversion:
EUR/GBP reveals a bearish undertone with a medium-term triangle pattern. Previous extreme moves within the pattern may shorten as it narrows. The pivotal 0.8635 level acts as a horizontal line of best fit, and recent bounces off the upward sloping trendline support suggest potential resistance at the 0.8635 level. Overcoming these hurdles, including the 200 SMA, could signal a shift in the bearish trend.
Conclusion:
As sterling navigates through the upcoming US CPI and UK GDP releases, traders are poised for potential shifts in market dynamics. Technical analyses provide insights into the current stances of GBP/JPY, GBP/USD, and EUR/GBP, offering a comprehensive view of the intricate forces at play in the currency markets.