TheNews

Trading the News: U.K. Consumer Price Index (CPI)

GBP/USD may stage a larger recovery over the next 24-hours of trading as market participants forecast the headline & core U.K. Consumer Price Index (CPI) to uptick in July. Indeed, signs of stronger inflation may undermine expectations for a material shift in the monetary policy outlook amid the rift within the Bank of England (BoE).

What’s Expected:

Why Is This Event Important:

With the U.K. preparing to depart from the European Union (EU), there’s growing speculation the BoE will reestablish its easing cycle at the next interest-rate decision on August 4, but we may see another split decision to retain the current policy as the marked depreciation in the British Pound raises the risk of overshooting the 2% target for inflation.

How To Trade This Event Risk

Bullish GBP Trade: Headline & Core Inflation Climb Higher in June

• Need green, five-minute candle following the print to consider a long GBP/USD trade.
• If market reaction favors buying sterling, long GBP/USD with two separate position.
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bearish GBP Trade: U.K. CPI Report Disappoints

• Need red, five-minute candle to favor a short GBP/USD trade.
• Implement same setup as the bullish British Pound trade, just in reverse.

Potential Price Targets For The Release
GBP/USD

• With a near-term inverse head-and-shoulders formation taking shape, GBP/USD may stage a larger recovery as the Relative Strength Index (RSI) comes off of oversold territory, with a closing price above 1.3360 (50% expansion) to 1.3370 (78.6% expansion) raising the risk for a move back towards the Fibonacci overlap around 1.3640 (38.2% retracement) to 1.3720 (61.8% expansion).
• Key Resistance: 1.4880 (50% retracement) to 1.4930 (38.2% expansion)
• Key Support: 1.2460 (61.8% expansion) to 1.2500 pivot

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