GBP to USD Forecast: Bears Eye Sub-$1.27 as the US CPI Report Looms

Highlights

• This morning, China consumer price inflation and producer price index figures influenced investor sentiment.
• While Bank of England Chief Economist Huw Pill raised the prospects of further rate hikes, UK retail sales figures raised red flags to deliver uncertainty.
• The nearer-term technical indicators are bearish, with sub-$1.27 in view.

On Tuesday, the GBP to USD fell by 0.28% to wrap up the day at $1.27475. Disappointing BRC Retail Sales Monitor and China trade figures weighed on buyer appetite.

It is a quiet day ahead for the GBP to USD. There are no UK economic indicators for investors to consider. The lack of economic indicators will leave central bank commentary to influence.

However, no Bank of England Monetary Policy Committee Members are on the calendar to speak today, leaving chatter with the media to move the dial.

Before the European opening bell, consumer price inflation and producer price index numbers from China set the tone.

Inflation figures from China set the tone ahead of the European opening bell.

Consumer prices fell by 0.3% year-over-year in July after stalling in June. Economists forecast a 0.4% decline, signaling weak consumer demand. However, consumer prices increased by 0.2% in July, reversing a 0.2% decline in June. Economists forecast a 0.1% increase.

However, the producer price index fell by 4.4% year-over-year, following a 5.4% decline in June. Economists forecast a 4.1% decline.

While the producer price index declined at a less marked pace in July, the 4.4% fall reflected the ongoing weakness in global demand, aligned with the July Caixin manufacturing PMI and the latest import and export figures. Nonetheless, a possible bottoming out and a pickup in consumer prices should provide some comfort.

The US Session

There are no US economic indicators to move the dial this afternoon. However, investors should monitor the news wires for Fed chatter with the media ahead of the US CPI Report out on Thursday.

GBP to USD Price Action

Daily Chart

The Daily Chart showed the GBP to USD sat below the $1.2785 – $1.2862 resistance band. Looking at the EMAs, the GBP to USD moved through the 50-day EMA ($1.27440) while also holding above the 200-day EMA ($1.24495), sending bullish near and longer-term price signals.

Notably, the 50-day EMA widened from the 200-day EMA, signaling price gains.

Looking at the 14-Daily RSI, the 46.12 reading sent bearish price signals. The RSI signals a fall through the 50-day EMA ($1.27440) to bring sub-$1.27 and the $1.2520 – $1.2440 support band into view. However, a GBP to USD hold above the 50-day EMA ($1.2740) would support a breakout from the $1.2785 – $1.2862 resistance band to target $1.29.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD hovers below the $1.2785 – $1.2862 resistance band. The GBP to USD also sits below the 50-day ($1.27743) and 200-day ($1.27888) EMAs, sending bearish near and longer-term price signals.

Significantly, the 50-day EMA pulled back from the 200-day EMA, a bearish price signal. However, a GBP to USD move through the EMAs would support a breakout from the $1.2785 – $1.2862 resistance band to give the bulls a look at $1.29. Failure to move through the 50-day EMA would leave sub-$1.27 and the $1.2520 – $1.2440 support band in play.

The 14-4H RSI reading of 50.26 sends moderately bullish signals, with buying pressure outweighing selling pressure. Significantly, the RSI signals a move through the EMAs and the lower level of the $1.2785 – $1.2862 resistance band.