Baxia Markets
June 19, 2024

Bullish Patterns Emerge in GBPUSD Amidst Stable Inflation Metrics

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Today's GBP economic calendar highlights mixed inflation metrics, impacting the Pound Sterling (GBP) and trading strategies. The year-on-year (YoY) inflation rate met expectations at 2%, down from the previous month's 2.3%, indicating stable but slightly easing inflationary pressures. The month-on-month (MoM) inflation rate was 0.3%, slightly below the 0.4% forecast, suggesting moderating price increases. Core inflation YoY matched expectations at 3.5%, down from 3.9%, indicating easing underlying pressures. However, the MoM core inflation rate was higher than expected at 0.5%, above the forecast of 0.2%, though lower than the previous month's 0.9%. This stability in YoY inflation and the unexpected rise in MoM core inflation might lead to a mixed reaction for the GBP, potentially supporting the currency while raising concerns about economic activity. The Bank of England will likely consider this data in future interest rate decisions, balancing the need to support growth against the risk of persistent inflation, influencing GBP trading strategies in the short term.Bullish Patterns Emerge in GBPUSD Amidst Stable Inflation Metrics

The Pound Sterling (GBP) edged higher above the round-level resistance of 1.2700 on Wednesday after the United Kingdom's (UK) Office for National Statistics (ONS) reported that price pressures declined as expected in May. The UK's annual headline inflation returned to the central bank’s target of 2% for the first time in over three years, down from April’s reading of 2.3%. In the same period, the core Consumer Price Index (CPI), which excludes volatile food and energy prices, declined to 3.5% from 3.9%.

Monthly headline inflation grew steadily by 0.3%, though lower than estimates of 0.4%. The report also revealed that the annual Producer Price Index (PPI) for Core Output grew significantly by 1.0% in May, compared with a 0.3% increase a month earlier.

From a technical analysis perspective, several bullish patterns have emerged over the last two trading days on the 1-hour time frame, including a Double Bottom chart pattern and Bullish Engulfing candlesticks. These patterns suggest early signals for a bullish reversal. Confirmation through technical indicators such as the Exponential Moving Average (EMA) crossover, specifically the golden cross, could validate a long-term bullish reversal. A key resistance level to watch is the Ichimoku cloud. If prices, along with Kijun-sen, Tenkan-sen, and Chikou-span, break above the cloud, it may signal a stronger bullish reversal. Additionally, the upper side of the value area zone at 1.2767 serves as another key resistance. A break above this level may provide further confidence in a bullish reversal. Oscillators like the MACD and RSI are also indicating bullish sentiment for GBP/USD.

Despite the lower-than-expected MoM inflation rate, the overall fundamental outlook for GBP/USD remains bullish, as the other high-impact news items met or exceeded forecasts. This robust fundamental backdrop aligns with the bullish technical analysis, suggesting a continued upward trend for the GBP/USD pair.

Key Economic Releases to Watch Today

Time (GMT) Currency Event Importance Actual Forecast Previous
05:45 NZD Current Account Medium NZ$-4.36B NZ$-4.55B NZ$-7.837B
06:00 JPY Reuters Tankan Index Medium 6 12 9
06:50 JPY BoJ Monetary Policy Meeting Minutes High      
  JPY Exports YoY Medium 13.5% 13% 8.3%
  JPY Balance of Trade High ¥-1221.3B ¥-1300B ¥-462.5B
13:00 GBP Inflation Rate YoY High 2% 2% 2.3%
  GBP Inflation Rate MoM High 0.3% 0.4% 0.3%
  GBP Core Inflation Rate YoY High 3.5% 3.5% 3.9%
  GBP Core Inflation Rate MoM High 0.5% 0.2% 0.9%


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