GBPUSD Technical Analysis – The market awaits the US CPI report

Fundamental Overview

The USD got a short term boost recently as Trump floated reciprocal tariffs. That came after a good US NFP report where the data was mixed at best but still pointing to strength. The jump in average hourly earnings caught the eye but that might have been distorted by the drop in average weekly hours.

We’ve also got another jump in inflation expectations in the University of Michigan Consumer Sentiment survey showing that the tariffs news is the main culprit of the recent surge in expectations.

The focus now switched to the US CPI report due later today where Core inflation is expected to tick lower which would be a welcome news. A lower than expected print should see the US Dollar losing ground across the board once again, while a hot reading might boost the greenback for the rest of the week.

On the GBP side, the BoE last week cut interest rates by 25 bps as expected and we got a more dovish than expected vote split with the known hawk member Mann even voting for a 50 bps cut.

The pound sold off initially but then started to fade the weakness as the market focused on the word “careful” that was added in the “gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate” line.

BoE’s Bailey then doubled down on that, saying that it was deliberate because of the uncertainty they are facing, so that brushed aside the more dovish expectations for the rates path triggered by the vote split.

GBPUSD Technical Analysis – Daily Timeframe

On the daily chart, we can see that GBPUSD maintains the uptrend structure with the series of higher lows into the key resistance zone around the 1.25 handle. That’s where we can expect the sellers to step in with a defined risk above the resistance to position for a drop into the 1.20 handle. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 1.28 handle next.

GBPUSD Technical Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that we have an upward trendline defining the bullish momentum. If we get a pullback into the trendline, the buyers will likely lean on it to position for a break above the resistance. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into new lows.

GBPUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that we have a minor support around the 1.2420 level. This is where we can expect the buyers to step in to position for the break above the key resistance. The sellers, on the other hand, will look for a break lower to target the major trendline.

From a risk management perspective though, it would be much better to wait for the US CPI report as any technical setup can be invalidated in a blink of an eye when the data gets released. The red lines define the average daily range for today.

Upcoming Catalysts

Today we have the US CPI report. Tomorrow, we get the UK GDP, the US PPI and the latest US Jobless Claims figures. On Friday, we conclude the week with the US Retail Sales data.