- 51% of pending orders in the 100-pip range are to buy the pair
- 52% of traders are bullish on the Pound
- Important resistance level lies near 1.3360
- Upcoming events: UK Average Earnings Index 3m/y, UK Claimant Count Change, UK Unemployment Rate, US PPI m/m, US Core PPI m/m
The Sterling jumped against the US Dollar to the highest level since late 2016, as Tuesday reports showed the strong growth in the UK consumer inflation. Following the release, the GBP/USD exchange rate surged 0.45% or 59 base points to the 1.3262 mark to reach the yearly peak.
The Office for National Statistics announced that its CPI for Britain revealed stronger-than-expected gain of 2.9% in August, up from an increase of 2.6% in the preceding month. The country's consumer prices growth was the strongest since the decision to quit the European Union, as Brexit kept pushing up the living cost in the UK. Higher costs of fuels as well as solid rise in clothing and footwear prices contributed most to the growth, as retailers passed cost pressures straight to customers.
Major releases scheduled for today
Similarly to yesterday, this trading session is to start with several data releases from the United Kingdom at 0830GMT, namely, the Average Earnings Index, Unemployment Change and Unemployment Rate. Subsequently, the United States is to publish the Producer Price Index and Core Producer Price Index for the month of August at 1230GMT.
GBP/USD to reach upper edge of dominant pattern
Due to release of satisfying data on the UK CPI, the Pound got an upside momentum that helped it to cross the monthly R1 at 1.3208 and then continue the surge. In the early Wednesday morning the pair even managed to reach the weekly R1. Most probably, until a release of information on the UK Average Hourly Earnings the pair will continue to fluctuate around the 1.3310 level. Usually, the market reaction on this event amounts to 30-40 basis points. This means that if the released data will justify experts' forecasts, the Sterling might finally reach the upper trend-line of a dominant ascending channel and then make a rebound. In the opposite scenario, the pair is likely to slip back to the 55-hour SMA and then continue the downfall.
Hourly chart
The massive 116-pip appreciation of the GBP/USD exchange rate on Tuesday pushed the rate above the weekly R1. No changes to the overall bullish sentiment have occurred this session, as the Pound has already reached the upper boundary of a long-term ascending wedge. Even though the rate might still close in the green area, the following trading days could see a downward reversal in sentiment.
Daily chart
Bullish sentiment deteriorates
SWFX market sentiment has diminished on Wednesday, as the number of long positions is 52% (-5%). Meanwhile, 62% of pending orders are to buy the Pound.
On the other hand, OANDA traders remain bearish on the pair, as 58% of open positions are short (-2%). Traders at Saxo Bank are likewise bearish with 66% short positions (+3%).