Cable extends recovery after Friday’s drop, holding positive sentiment after the BoE kept its mode of gradual rate increases on last week’s policy meeting, but showed readiness for more aggressive steps if needed to curb surging inflation.
Traders look for more clues from Wednesday’s UK CPI report, with forecasts for inflation to rise to 9.1% in May from 9.0% previous month and expectations that inflation can top 11%.
This would put the central bank under increased pressure to act more aggressively, but also make its position more difficult as higher interest rates would result in slower economic growth, with a slowdown in the second quarter being already signaled, with recession risk being also in play.
Improved technical structure on daily chart (14-d momentum is heading north and looking for a break into positive territory and 5/10DMA’s turned to bullish configuration)supports near-term action, however, more evidence is needed to signal bulls are taking control.
Daily close above 10 DMA (1.2278) will generate initial bullish signal, which would look for confirmation on extension and close above 1.2406 (June 16 recovery high and converged 30/20DMA’s (1.2411/24).
Res: 1.2406; 1.2424; 1.2455; 1.2490.
Sup: 1.2278; 1.2241; 1.2172; 1.2092.
Source: Slobodan Drvenica – Windsor Brokers
Read more about GBPUSD: GBPUSD Forecast: Pound eyes 1.2400 as next bullish target