GBP/USD Forex Technical Analysis – Steady-to-Lower Ahead of Consumer Inflation Expectations Data

The British Pound is edging lower on Thursday shortly before the release of a report on Consumer Inflation Expectations. This comes a day after a government report showed an unexpected easing in consumer inflation. Weighing on the Sterling is rising U.S. Treasury yields and a stronger U.S. Dollar.

At 07:09 GMT, the GBP/USD is trading 1.1522, down 0.0018 or -0.16%. On Wednesday, the Invesco CurrencyShares British Pound Sterling Trust ETF (FXB) settled at $110.80, up $0.26 or +0.23%.

The Sterling posted a small advance against the U.S. Dollar on Wednesday as the greenback moved broadly lower and British inflation unexpectedly eased for the first time in a year.

In the wake of the inflation data, traders expect the Bank of England (BoE) to raise interest rates by 50 basis points next week. With the Fed expected to hike its benchmark by 75 to 100 basis points after its policy meeting on September 21, the interest rate differential favors the U.S. Dollar.

Bigger rate hikes by the Fed along with slowing domestic growth and weaker equity markets should leave the GBP/USD vulnerable to further deterioration.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum is leaning a little to the upside following the closing price reversal bottom on September 7.

A trade through 1.1406 will negate the chart pattern and signal a resumption of the downtrend. A move through 1.1738 will change the main trend to up.

The nearest resistance is a minor pivot at 1.1572, followed by a short-term retracement zone at 1.1653 to 1.1711. This is the last potential resistance before the 1.1738 main top.

Daily Swing Chart Technical Forecast

Trader reaction to 1.1535 is likely to determine the direction of the GBP/USD on Thursday.

Bullish Scenario

A sustained move over 1.1535 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the pivot at 1.1572. Overtaking this level will indicate the counter-trend buying is getting stronger with 1.1653 to 1.1711 the next likely target zone.

Bearish Scenario

A sustained move under 1.1535 will signal the presence of sellers. Taking out this week’s low at 1.1480 will indicate the selling is getting stronger. This could create the momentum needed to extend the selling into the support cluster at 1.1412 to 1.1406.