GBP/USD Daily Price Forecast – Brexit Continues to Weigh On GBP/USD Ahead of UK CPI DataThe pair has finally yielded to the pressure due to the uncertainty in the Brexit process and this has led to the breach of the 1.32 region
The GBP/USD is trading tightly to Tuesday’s close, playing near 1.3110 after a drop into 1.3067 saw a mild rebound on Prime Minister Theresa May’s last-minute win in the House of Commons. Sterling is continuing on the defensive despite an unexpected win for PM May on her Brexit strategy. Inflation figures for the UK are due later today and Pound buyers will be looking for a positive read to halt the current downside. The Sterling headed south through Tuesday’s action, dropping from the day’s high of 1.3267 in the run-up to a Brexit vote in the House of Commons, where Labor voters were expected to side with conservative Tories and vote to make extreme changes to PM May’s latest Brexit proposal. The Prime Minister managed to pull out a last-minute win, and the GBP/USD managed to recover from the day’s low, but the pair remains deeply bearish as Brexit is set to continue weighing on the Pound.
Pound Finally Gives Way
Yesterday’s dip on Brexit worries saw the pair fell to a low of 1.3070 but soon rebounded as Theresa May managed to hold off Brexiteers with yet another narrow victory on the customs amendment. The fall in cable saw it close in on the 38.2 retracement level @ 1.3055 once again – which helped to stall the end of June low – with the 29 June low @ 1.3069 helping to aid buyers with some support levels to lean on. But even so, sellers remain in control of the pair. Price continues to trade well below the 100 and 200-hour moving averages, with the pair forming what looks like a double-bottom formation around the 1.3100 handle right now. The key level holding up the pair is the 21 June support @ 1.3102 with the hourly closes seen so far failing to break below said support level. And that is where buyers are leaning on right now for support. They managed to do so in three previous attempts since a breach below that at the end of June trading.
So, while sellers are still in control the downside looks rather limited for now with support seen @ 1.3102 first followed by that near 1.3055-70 now. It will require a technical break of 1.3055 for the pair to continue to track lower, and with a BOE rate hike on the cards in August it’s hard to justify further deterioration in sterling. On release front, UK’s calendar will see high-impact Consumer Price Index numbers early in the London session at 08:30 GMT, and the y/y CPI is expected to tick upwards to 2.6%, compared to the last reading of 2.4%, while Core CPI is expected to move from 2.1% to 2.2%. US Market hours will see Crude Oil Inventories and Building Permits data with hawkish forecast for Building permit readings. Meanwhile Investors will continue to watch out for Dollar’s momentum as The greenback is closing back in on key levels and this will be a key flow factor in determining direction for the pair prior/after the inflation report hits.