GBP/USD: Recovery underway as traders await UK CPI for fresh direction

  • Buyers sneak in from 27-month low amid fresh risk-off dragging the US Dollar (USD) down.
  • Monthly inflation numbers from the UK and the US housing market data can decorate today’s economic calendar.
  • Trade/political headlines extend the watch-list.
With the fresh risk-off dragging the greenback down, GBP/USD recovers from 27-month low while taking the bids to 1.2416 ahead of the London open on Wednesday.

Iran’s rejection to the US statements signaling peace and on-going doubts surrounding the US-China trade deal continues to weigh on the US currency that piled gains yesterday after monthly Retail Sales data from the US argued for the dovish Fedspeak.

During early Wednesday, Boris Johnson and Jeremy Hunt, the final two candidates to the UK Prime Minister (PM) post, appeared for their last political presence together at the fundraising event in London, attended by 100 Conservative donors. Both the leaders criticized the Irish backstop and pledged to remove it once in power. However, the EU, as conveyed by the BBC, is in no mood to renegotiate the condition.

Elsewhere, the front runner Boris Johnson also said to highlight the possibilities of the early general election to oust opposition Labour party from the parliament if elected.

The macro gauge of risk sentiment, the US 10-year treasury yield, weakens 2 basis points to 2.099% by the press time.

While political/trade news can keep entertaining momentum traders, June readings of the UK inflation numbers and the US housing market data will also be up for a watch. British Consumer Price Index (CPI) is likely to remain unchanged at 2.0% on a yearly basis but may dip to 0.0% from 0.3% MoM. On the other hand, the US Building Permits (MoM) could rise to 1.300 million versus upwardly revised 1.299 million but Housing Starts bears the expectations to decline to 1.261 million versus 1.269 previous.

Technical Analysis

Oversold conditions of 14-day relative strength index (RSI) at the multi-year low favors the Cable’s pullback to 1.2440 and then towards Monday’s low close to 1.2510. In a case where prices rally past-1.2510, the weekly top surrounding 1.2580 could flash on bulls’ radar.

Alternatively, pair’s decline below the latest lows of 1.2396 highlights late-March and April 2017 lows near 1.2330 and 1.2365 respectively.