The British pound currency has continued to old above the 1.2400 level against the US dollar after the UK inflation rate remained above 10%, which was above consensus.
The consumer price inflation rate in the United Kingdom eased to 10.1% year-on-year in March 2023, down from 10.4% in February but more than market expectations of 9.8%.
The rate remained above the 10% mark for a seventh consecutive period and the Bank of England’s 2% target for almost two years, suggesting policymakers might continue to raise borrowing costs.
Meanwhile, inflation slowed for both transport (0.8% vs 2.9%) and restaurants and hotels (11.3% vs 12.1%). The core inflation rate, which excludes volatile items such as energy and food, was unchanged at 6.2% in March, not far from September’s record of 6.5%.
Going forward, the Bank of England could continue to hike rates under these circumstances, which is likely to be further supportive for the British pound currency.
Looking at sentiment data and how traders feel about sterling, the ActivTrader Market Sentiment tool shows that traders are growing more bearish despite the recent sharp price reversal.
With 56% of traders currently bullish it should be noted that this current sentiment reading is highlighting that sterling still has much scope to trade even lower also.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, a clear head and shoulders pattern has formed, with the break happening around the 1.2350 level.
Therefore, the head and shoulders pattern are also close to being invalidated. According to the overall size of the pattern, I would expect that we could soon see a 400-point downside in GBPUSD if sterling clears 1.2350 this week.
If the pattern is invalidated, expect a rally towards the 1.2800 to 1.3000 area for sterling.
GBPUSD Medium-term Technical Analysis
According to the daily time frame it shows that that GBPUSD pair is starting to settle above its 50-day and its 200-day moving average, which is located close to top of its medium-term range.
According to the technical analysis the GBPUSD is bullish and is getting a buy signal from the Ichimoku indicator while the price trades above the 1.2350 area.