Levels in play for cable ahead of UK CPI report
![Levels in play for cable ahead of UK CPI report Levels in play for cable ahead of UK CPI report](https://i3.wp.com/images.forexlive.com/images/GBPUSD%20D1%2022-05_id_d2dea222-7247-42f5-93e7-2eb0aa140158_size975.jpg?w=975&resize=975,507&ssl=1)
The highlight of the agenda for the upcoming session will be the UK CPI report. Here’s what you need to know before the data is released later at 0600 GMT. Instead, let’s look at the levels in play for GBP/USD and the potential reaction.
GBP/USD daily chart
The pair is now trading just above the 1.2700 mark, with price action persisting around the April high of 1.2709. Buyers are in control, so they already have momentum on their side in this regard.
So, if inflation proves more stubborn than expected, sterling bulls will wait to seize this opportunity. A push towards offers and some resistance around 1.2800 will be next. Next, buyers will target the March high of 1.2893, but that could be overkill and would require help from the dollar side of the equation.
The flip side of this argument is that the short-term chart comes into play instead:
GBP/USD Hourly Chart
GBP/USD buyers have been defending a more bullish short-term bias for a week now. They defended the major hourly moving averages, specifically the 100 hour moving average (red line).
As such, this will be the first line of defense to watch in the event of a weaker than expected CPI report. This level currently sits at 1.2693. A break in this trend will see the short-term bias become more neutral, opening the way for price action between this level and the 200 hour moving average (blue line) – now seen at 1.2631.
At the same time, the 100-day moving average at 1.2632 will also be a key technical support level to watch.
Sellers will need a simultaneous break below the two key highlighted levels to find the next step towards 1.2600. Only then can we perhaps start talking about a return to 1.2500 again. But not before the 200-day moving average at 1.2540.
I think this could only come into play if traders are absolutely certain that today’s data will cement a rate cut in June. But I fear that even with slightly lower inflation figures, it won’t be enough to give 100% certainty.
After all, the expected drop in annual inflation rates for April is overshadowed by Ofgem’s decision to lower the energy price cap by 12%. So the precise impact of this might be difficult to read.
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