Investors are wary of the price chart movement of the GBP/USD currency pair from the beginning of this week following important data expected to drive the price direction.
After the UK economic growth and jobs data was published, the Pound was seen to remain flat and did not react significantly until yesterday's European session.
However, the situation changed ahead of the New York session yesterday when the Pound began to show strengthening. Is the data slow to affect the Pound?
Nope. On the other hand, the surge in the value of the Pound is due to the depreciation of the US dollar following the reaction to the release of the United States (US) inflation data.
The US annual inflation reading fell to 7.1% in November, showing a 5th consecutive month of decline while strengthening expectations for the Federal Reserve (Fed) to slow interest rate hikes.
Both the Fed central bank and the Bank of England (BOE) on Thursday tomorrow are expected to raise interest rates by 50 basis points.
Before that, the UK inflation data will be the focus first at the beginning of the European session shortly.
Looking at the price action, a daily gain of around 200 pips was exhibited on the GBP/USD chart recording the latest 6-month high.
Initially the price leveled above the Moving Average 50 (MA50) support level on the 1-hour timeframe on the GBP/USD chart before surging through the resistance at 1.24000 to reach a recent high around 1.24400.
However, after reaching that level, the price dropped back almost 100 pips to close the trade in the New York session.
Prices are still showing signs of movement on a bullish trend with the expectation that the increase will continue today (Wednesday).
A successful bounce back past the 1.24000 level will push the price higher with the latest target being at the height of 1.25000.
On the other hand, if the price drops again, the 1.23000 level will be the initial focus to be tested before investors evaluate the signal of a bearish trend change.
The continued lower decline is seen to be heading towards the 1.22000 zone and further at 1.21000.
