Rate hike expectations are pushing Pound up

After correcting a little after a sharp rally that was cause by better than expected UK CPI data. It is obvious that expectations are high and unless proven otherwise we will probably see Pound rising versus US dollar in the meantime. 

However, two pieces of information that can rock the boat are coming today from US. US CPI (Consumer Price Index) and FED minutes are to be released during US session.

CPI is coming at 12:30 GMT and FED minutes at 18:00 GMT. These two may completely turn things around. Better than expected US CPI and bullish hawkish FED minutes will be taken as a sign that FED will start raising interest rates sooner than BOE. On the other hand, worse than expected data and dovish tone inside FED minutes will re-confirm that BOE is ahead of FED and US dollar will go down against British Pound. 

Pound is rising at the time of writing. If it turns around, there is plenty of support below. The first level is right at early European session lows: 1.5662. Key support is yesterday’s low at: 1.5644. 

I tend to think that the second level is not reached. On the other hand, resistance is right ahead at yesterday’s high: 1.5717.

Let’s wait and see what happens when US markets open and fundamental releases come out. 

Intra day support and resistance level on Pound/Dollar

British Pound soars on UK CPI

There was a sharp rise in gbp/usd when UK CPI data was released. I somehow missed the event, probably due to being absent minded when I was looking through at key fundamental events for this week. Having broken yesterday’s low Pound reversed and was rising since 07:34 GMT. There was no knee jerk reaction as it usually happens when news is released. Pound rose steadily for 1 hour and then rallied on positive CPI news. 

What does that mean? Well, expectations for rate hike from BOE are renewed and 1.5700 level will probably be under fire sooner rather than later and this time it may actually give in. If we see dovish tone in FED minutes on Wednesday and worse than expected US CPI the same day, the above mentioned level will probably be broken and price will head towards 1.6000. 

In that case we would be looking for going long in British Pound and shorting US dollar. Asian session lows and highs will be key points in selecting the best trades. For the time being, let’s wait for happens with 1.5700, because it is under attack at the time of writing.

Pound soars on better than expected CPI

gbp/usd pair opens with false breaks

Sunday opening in gbp/usd pair was marked by two false breaks. The pair initially gapped down, then recovered and made a false push upwards over its Friday resistance point. Gaps are the norm on Sundays; therefore it is advisable not to have open positions in any pairs over the weekend.

I do expect Pound to stay volatile this week and 1.5700 resistance level to be attacked. However, it is smart to wait for European session to begin on Monday and find better areas for entering long or short positions.

Support is around 1.5570 and resistance any number above 1.5660. 

The pair is slightly biased to move upwards. A convincing move below 1.5400 level would negate the bias. If broken upwards the next level of resistance lies around 1.5770 level, followed by 1.5900. If this area is broken we will see 1.6000 even number under siege sooner rather than later.

Market participants have expected rate hikes from BOE, but it seems to me we may expect FED to start hiking earlier than the Bank of England. If that is the case, US dollar might start gaining strength against British Pound at 1.6000 and the low of 1.4564 will come into play. This has yet to be seen. 

gbp/usd 15 minute chart