The GBPUSD experienced an upward trend today following stronger-than-expected CPI data (refer to Justin's report for details). This surge pushed the price towards Monday's high and a critical swing area ranging between 1.22608 and 1.22823 (indicated by red numbered circles on the four-hour chart). The price moved above that area, and peaked at 1.22967, just shy of the natural resistance at 1.2300. Subsequently, momentum could not be sustained, and sellers entered the market causing a retracement in gains. The price reached a low of 1.2220 in the last hour or so of trading, near the pre-UK CPI level of 1.22275. Currently, the price stands at 1.2236.
Looking ahead, the swing area between 1.22608 and 1.22823 remains crucial. Buyers need to push through this range to assert more control. A move above this area, followed by a break above 1.2300, would boost buyers' confidence.
Conversely, on a move to the downside the 61.8% retracement of the 2023 trading range would be targeted at 1.2200, coinciding with last week's swing highs (green numbered circles on the four-hour chart). A drop below this point could lead to yesterday's low of 1.21778, followed by a swing area between 1.2134 and 1.21467 (refer to below numbered circles on the chart). The 50% midpoint at 1.21244 is also a critical level on the downside.
It is essential to note that if the USD strengthens (and GBPUSD weakens) following a more hawkish Fed stance at the FOMC meeting, a move towards the 1.2160 area cannot be dismissed. This area now contains the 200-hour, 100-hour, and 100-day moving averages (blue and green MA lines on the chart). As such, this level is crucial for both buyers and sellers, serving as a significant indicator of market sentiment . Keep a close eye on these developments.
Also remember that the BOE will be in the hot seat tomorrow as they need to figure out how to square 10.4% inflation with fears of banking contagion, their hopes for inflation, what they have already done, etc.
It is not a clear picture. That should keep up and down volatility high in the GBP going forward. So watch the key levels.for low risk opportunities.