UK CPI Data Drags GBP/USD Plunge Down!


 UK inflation data published at the start of the European session yesterday has had a significant impact on currency movements leading up to the next session.

The UK's annual reading of the consumer price index (CPI) for April came in at 8.7% against expectations of 8.2%, but this was the first reading below 10% since October last year.

The pound jumped when the initial reaction to the data was published, but fell again until it resumed trading in the New York session yesterday.

Investors may be digesting UK inflation remaining high, but the central bank is seen as having little room to slow policy as interest rates that are too high could harm current economic growth.

Observing the price movement on the chart of the GBP/USD currency pair, the price is seen to jump first to the level of 1.24700 before a decline of around 100 pips is exhibited.

After falling back below the 1.24000 level, the price finally reached around 1.23600 at the end of the New York session setting a new 5-week low.

The price movement that is back below the Moving Average 50 (MA50) barrier on the 1-hour time frame on the GBP/USD chart supports expectations for the bearish trend to continue.

A slow decline is seen in the Asian session this morning (Thursday), expected to head around 1.23000 and the price reaction in that area will be watched.

In fact, prices could drop even lower if the Pound continues to be gloomy while the US dollar manages to maintain its strength at the end of the week.

On the other hand, if the price makes a comeback, the 1.24000 level is seen to be the nearest resistance that will be tested before the signal of a trend change when the price crosses the MA50 barrier.

The expected rise will continue towards 1.25000 before the higher target will shift at 1.26000 with bullish movements more clearly displayed.