GBP/USD Update: Cable in the Pound Seat Ahead of CPI,

GBP/USD News and Analysis

GBP/USD weekly chart reveals further longer-term upside potential
Cable’s bullish posture likely to hold heading into CPI and BoE meeting next week
Major risk events: UK CPI and the BoE rate decision
The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library

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GBP/USD Weekly Chart Reveals Further Longer-Term Upside Potential

Looking at the weekly GBP/USD chart, bulls have enjoyed three strong weeks after bouncing off of support around the 50% retracement of the major 2021 to 2022 sell-off at 1.2295. This week, bullish price action continues its upward march, currently trading above the rising wedge formation and even breaching the zone of resistance around 1.2700. In the event the Bank of England (BoE) presents a more hawkish view than expected, cable is likely to remain supported. However, risks to the downside remain in play as market currently anticipates as much as 130 more basis points in tightening into the start of next year, something that the BoE has expressed concern over in the past. A dovish 25 bps hike could release some of the steam relating to the bullish move, seeing cable drift a little lower, towards the upward sloping trendline support (former resistance).

GBP/USD Weekly Chart

Source: TradingView, prepared by Richard Snow

GBP/USD Technical Considerations Ahead of CPI and BoE

The daily chart helps to view more recent developments in the pair as price action closed above the zone of resistance in yesterday’s trading, while holding this level into Friday. The next level of interest to the upside is all the way at the psychological level of 1.3000. On the bearish side of the coin, 1.2700 becomes immediate support, followed by 1.2585. The RSI suggests the pair is on the verge of overbought territory, increasing the chances of a pullback ahead of the major event risk next week.

GBP/USD Daily Chart

Source: TradingView, prepared by Richard Snow

Risk Events for the Week Ahead

On Friday Bullard is scheduled to make an appearance, although, he is conducting a presentation so there is little expectation he is likely to send a hawkish ripple throughout the market as he has done in prior speeches. The Fed’s Christopher Waller is also scheduled to make an appearance today with the day and week rounding up with the preliminary data of the University of Michigan consumer sentiment survey in the US.

Next week is hugely UK focused, with CPI on Wednesday and the Bank of England rate decision on Thursday where markets anticipate a 25 basis point hike with an outside chance of even a 50 bps hike. Elevated UK average earnings and widespread price pressures have proven resilient in the face of tighter financial conditions but inflation is anticipated to move sharply lower for the rest of the year as base effects and lower energy prices take effect.

Lastly, Jerome Powell is due in front of the Senate Banking Committee to provide testimony of recent monetary policy decisions. Periods of stress have had a tendency to reveal themselves in the past despite the Fed reassuring markets that the banking sector is stable. Talk of potential “mergers” could reignite concerns but the two day hearing is largely expected to be business as usual.