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Hello, dear traders!
Unlike the euro, the pound sterling strengthened against the US dollar yesterday. At the same time, the bullish trend will extend on one condition. Otherwise, the pound is unlikely to continue rising. Before that, let's turn to the macroeconomic calendar. In the United Kingdom, the consumer price index grew by 0.3% m/m, missing expectations of a 0.4% rise. At the same time, consumer prices came at 3.1% y/y. The reading had been expected to increase by 3.2%. This data can be considered from different points of view since the shortage of labor force in the Kingdom after its departure from the European Union boosted wages. In other words, like in the US, inflation in the UK is accelerating, which is considered by the Bank of England as temporary.
Daily chart
On the D1 chart, the GBP/USD movement remains unclear after the release of the CPI report. Now, let's talk about the necessary condition for the extension of the bullish trend. It is about a true breakout at 1.3800. Based on the chart, even after a breakout, pound bulls are likely to encounter strong resistance in the area of 1.3832-1.3874. A breakout at 1.3874 is expected to push the pair to another important mark of 1.3900. At the same time, the quote is unlikely to rise to 1.4000.
In case of a bearish trend, the pair may plunge to 1.3710-1.3700, where there are the MA (50), the orange EMA (200), and the red Tenkan-Sen. It is no coincidence that these indicators converged near 1.3700. Those of you who want to buy the sterling should wait until the price falls to the strong level of 1.3700 and bullish reversal Japanese candlestick patterns occur. At the moment of writing, the pound/dollar pair is trading slightly lower. If pound bulls attempt to break through the resistance zone of 1.3800-1.3830, bearish reversal candlestick patterns may occur there on lower time frames. If so, it is wise to sell the pair with targets at around 1.3715/10. Targets for long positions should be set at around 1.3800. So far, this level is seen as resistance for bulls. Finally, since there are no more important events that could seriously affect the price today, GBP/USD is likely to be traded under the influence of market sentiment and technical factors.
Good luck!
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