GBP/USD Eyes the UK CPI Report with ECB Chatter to Direct the EUR/USD

It was another busy start to the day for the Pound. UK inflation figures for August will be the key stats of the day. Following the US CPI report on Tuesday, higher-than-expected figures would deliver a GBP/USD rally and a return to $1.17 to target $1.18.

Employment figures on Tuesday fueled bets of a 75-basis point rate hike next week. Today’s numbers could cement a 75-basis point move and suggest a more hawkish post-September move.

For the EUR/USD, industrial production figures for July will draw interest. Markets are expecting weak numbers following the disappointing figures from Germany. However, barring worse-than-expected figures, the EUR should show a limited response.

ECB member chatter and EC President Ursula von der Leyen will influence. ECB members Enria, Lane, and McCaul will deliver speeches today.

GBP/USD Price Action

At the time of writing, the Pound was up 0.16% to $1.15080. A mixed start to the day saw the Pound fall to an early low of $1.14813 before rising to a high of $1.15124.

Technical Indicators

The Pound needs to move through the $1.1572 pivot to target the First Major Resistance Level (R1) at $1.1656 and the Tuesday high of $1.17381. Today’s CPI report will need to beat forecasts to support a return to $1.17.

However, barring weak wholesale inflation numbers from the US, the GBP/USD would likely fall short of the Second Major Resistance Level (R2) at $1.1821.

The Third Major Resistance Level (R3) sits at $1.2071.

Failure to move through the pivot would see the Pound test the First Major Support Level (S1) at $1.1407 and support at $1.1400. Softer-than-expected inflation figures from the UK and a spike in US wholesale inflation would put monetary policy divergence back in favor of the dollar.

A risk-off-fueled sell-off would bring the Second Major Support Level (S2) at $1.1323 into view. The Third Major Support Level (S3) sits at $1.1443.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.XXX.

The 50-day fell back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals. A GBP/USD move through the 50-day EMA ($1.15911) would bring R1 ($1.1656) into play.

However, failure to break out from the 50-day EMA would leave the Major Support levels in view.

EUR/USD Price Action

At the time of writing, the EUR was up 0.21% to $0.99880. A mixed start to the day saw the EUR fall to an early low of $0.99551 before rising to a high of $0.99891.

Technical Indicators

The EUR/USD needs to move through the $1.0040 pivot to target the First Major Resistance Level (R1) at $1.0114 and the Tuesday high of $1.01872.

Hawkish ECB member chatter would support a return to $1.010. However, barring weak US wholesale inflation figures, the EUR/USD will likely fall short of the Second Major Resistance Level (R2) at $1.0261. The Third Major Resistance Level (R3) sits at $1.0482.

Failure to move through the pivot would see the EUR/USD test the First Major Support Level (S1) at $0.9893.

However, barring a market flight to safety, the EUR/USD pair should avoid sub-$0.9850 and the Second Major Support Level (S2) at $0.9819. The Third Major Support Level (S3) sits at $0.9598.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The EUR/USD sits below the 50-day EMA, currently at $1.00248. The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA to deliver bearish signals.

A EUR/USD move through the 50-day EMA ($1.00248) and the 100-day EMA ($1.00293) would support a run at the 200-day EMA ($1.00818) and R1 ($1.0114). However, failure to move through the 50-day EMA would leave the Major Support Levels in play.

The US Session

US wholesale inflation numbers will draw interest going into the US session. Better-than-expected numbers would raise bets of a one percentage point rate hike and a more aggressive Fed move at the November meeting.

There are no FOMC member speeches to consider, with the FOMC in its September blackout period (September 10-22). The lack of chatter will leave the markets in data-dependent mode.

A DXY move to 111 would be on the cards should today’s wholesale inflation numbers point to further consumer price pressure down the road.