- Pending orders in the 100-pip range are at equilibrium
- 55% of traders are bearish on the Sterling (+2%)
- Gains could be capped near 1.40
- Upcoming events: US CPI m/m, US Core CPI m/m, US Core Retail Sales m/m, US Retail Sales m/m
The British Pound fell against the Greenback 10 points or 0.07%, following the UK CPI data release. However, GBP/USD continued to increase to touch the intraday high of 1.3924.
The UK inflation remained near its strongest level in almost six years in January, underlying the challenge the BoE would face trying to get the inflation growth pace back to the 2% target. The 12-month UK inflation rate remained the same as of December 2017 at the 3% rate, while analysts expected the decrease to 2.9%. The combination of limited pay growth and high CPI, as well as unclarity surrounding the terms on which the UK will quit the EU next year is likely to mean that the country's economic expansion would be weaker than in the EU overall.
Attention on US inflation data
The main attention in this session is turned to the US (Core) Consumer Price Index and (Core) Retail Prices to be released at 1330GMT.
GBP/USD likely to respect junior channel
The Sterling closed the previous trading session by gaining 56 pips against the US Dollar. The rate's failure to reach the bottom channel line on Friday and its subsequent surge was eventually followed by a breakout of the prevailing two-week channel down and the 55– and 100-hour SMAs near 1.3870.
The pair is currently trading in a short-term channel up. Its southern barrier is supported by the aforementioned SMAs, while the northern side—by the 200-hour SMA and the 38.20% Fibo retracement. This channel is likely to be respected during the first part of the day and maybe even further if the US CPI data do not introduce extensive volatility in the market.
The ultimate daily high should be the monthly PP at 1.40, while the nearest support is the distant weekly and monthly S1s at the 1.37 mark.
Hourly chart
As apparent on the daily chart, the Pound has breached the bottom boundary of the prevailing three-month channel down. This suggests that the British currency could continue its movement south down to the 55-day SMA near the 1.3660. This scenario is supported by technical indicators.
Daily chart
The bearish market sentiment has taken the upper hand in this session, as 55% of traders are holding short positions (+2%). Meanwhile, pending orders are not at equilibrium.
The market sentiment of OANDA traders stands at equilibrium in this session, compared to 55% short positions on the previous day. Saxo Bank clients remain increasingly bearish with 61% short positions (+6%).
Spreads (avg, pip) / Trading volume / Volatility