On the hourly chart, the GBP/USD pair retraced to the corrective level of 100.0% (1.2447) on Wednesday, rebounded, and reversed in favor of the US currency. Thus, the decline in quotes may continue toward the 1.2342 level. The pair's price holding above the 1.2447 level will work in favor of the British currency and signal the beginning of a rise toward the 1.2546 level.
Today is important for the British pound, but yesterday was not a day off either. Business activity indices in Britain showed a negative trend, but the American statistics were not very favorable either. By the end of the day, bullish traders had slightly intensified and managed to recover most of their losses. Today, they continued to attack but failed to consolidate above the 1.2447 level. The report on British inflation for April prevented them from doing so.
The consumer price index decreased from 10.1% to 8.7%, and these figures can be interpreted differently. The market expected a decrease of 8.2%, and the forecast was unmet. However, at the same time, British inflation has shown a record decline since the beginning of the Bank of England's tightening policy, which is a positive moment for the economy, but not for the British. The core inflation rate increased from 6.2% to 6.8%, although traders expected a slight slowdown. Thus, the main indicator decreased significantly, while core inflation did not. Therefore, the Bank of England should continue to raise interest rates, but did the traders come to the same conclusion?
The British pound fell by 60 points from its daily peak when I wrote the article. Since the inflation reports were ambiguous, I would not expect a further decline in the pound during the day. However, bears currently dominate the market, so the decline can continue. Furthermore, Bank of England Governor Andrew Bailey is speaking today, having already informed Parliament yesterday that the final interest rate could be higher than expected. He may also comment on the latest inflation data, and his rhetoric may become even stricter, as, in my opinion, the reports have a more negative color than positive.
On the 4-hour chart, the pair once again consolidated below the 1.2441 level, which allows traders to anticipate further decline toward the next corrective level of 127.2% (1.2250). No new emerging divergences are observed today for any indicators. I am not counting on a strong rise in the pound for now. I expected the pair to decline a month ago when it closed below the ascending trend corridor.
News calendar for the US and the UK:
UK - Consumer Price Index (06:00 UTC).
UK - Core Consumer Price Index (06:00 UTC).
US - FOMC Minutes Publication (18:00 UTC).
On Wednesday, the economic events calendar contains several interesting entries, most of which have already been published. The impact of the information background on traders' sentiment for the remaining part of the day can be quite strong.
Forecast for GBP/USD and trader advice:
I advised selling the British pound upon a new close below 1.2441 on the 4-hour chart with a target of 1.2342. These trades can be kept open at the moment. I advised buying the British pound upon a close above the range on the hourly chart with a target of 1.2546; however, I am now ready to adjust the recommendation: stronger buying signals are needed.