UK CPI preview: What to expect of GBP/USD?

GBP/USD finally advanced through 1.45 barrier for the first time in three trading session and now extends its solid rebound from almost one-month lows as the GBP shorts got squeezed amid growing support for anti-Brexit camp and strengthening oil prices.

Attention now turns towards the much-awaited UK inflation report, which is due to be published at 8.30GMT.

Bulls need a better CPI print to prolong upward trajectory

The UK consumer prices are expected to have risen 0.5% in April from a year earlier, the fastest pace in 15 months and the same pace as in March. On annualized basis, prices are forecast to come in at 0.5%, at the same pace like in March. While core figures, excluding volatile food and fuel costs, should book 1.4% after the 1.5% rate in March.

Should the CPI report show an uptick in prices last month, then the ongoing bullish momentum around the GBP would gain further traction, driving the prices beyond stiff hurdle place near 1.4550 levels. In fact, a combination of better-than-expected headline and core CPI would be an icing on the cake for the GBP bulls.

Contrarily, a weaker-than-expected headline and core CPI print could see the UK gilt yields fall further and therefore, trigger a fresh sell-off in GBP, knocking-off GBP/USD back towards hourly 200-SMA located near 1.4440-35 zone.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet notes, “The pair’s rebound from 50-day and 100-day SMAs confluence support has a tough resistance near 1.4500 handle to conquer. A clear break through 1.4500 handle would add on to the bullish bias, opening scope for an immediate up-move towards 1.4530-40 horizontal resistance and eventually towards 1.4600 round figure mark.”

“On the flip side, weakness below 1.4445-40 support should take support near 1.4400 round figure mark. Any further weakness below 1.4400 mark might continue to find strong support near 50-day and 100-day SMAs confluence region near 1.4345-40 zone. A convincing break below three-week through level would now act as a catalyst for a fresh leg of downfall for the pair.”