Inflation data released earlier was stronger than expected, as the headline inflation rate was 0.3% vs 0.2% expected (MoM). In addition, the core inflation rate moved to 0.3% vs 0.1% expected (MoM). The result was a move higher in the GBP/USD into strong resistance near 1.3700. However, price pulled back throughout the US session, and late in the day, the UK released their daily coronavirus deaths: 1,820. This is a new daily high since the pandemic began. UK Prime Minister Boris Johnson said the number was “appalling” and “there will be more to come.” Does this mean more stimulus? If so, will GBP move lower? The Pound is at important levels vs several currencies, and GBP pairs need to be watched closely.
GBP/USD has been in an upward sloping channel since putting in a low of 1.2675 on September 23rd as Brexit deal was priced into the market. The pair reached a post-Brexit high of 1.3703 on January 4th. That level has been tested 4 times since then, including today, and has failed to push higher each time. Today, GBP/USD put in marginal new highs to 1.3719, and quickly reversed, creating a shooting star candlestick formation, which indicates the pair may be ready for a reversal.
On a 240-minute timeframe, a megaphone formation has emerged, indicating the possibility for some volatility. Buyers will be looking at the shorter-term upward sloping trendline near 1.3550 to add to longs. If price breaks from there, the 1.3450 horizontal support will be key, as it is also near the bottom trendline of the upward sloping channel.
Much of the same can be said for GBP/JPY, which on a daily timeframe is approaching a downward sloping trendline (red) from early 2018 near 1.4350. However, just ahead of that is horizontal resistance at 142.70. Buyers will be looking for dips to the upward sloping trendline near 138.00 to add to longs, hoping price will test the long term trendline (red).
GBP/NZD has been moving lower since the pandemic highs on March 6th, however the pair has been moving in a sideways channel since early December. GBP/NZD is approaching the horizontal resistance of the recent channel, just below 1.9200. Today, GBP/NZD spiked through that level and reversed, forming a bearish engulfing pattern. The high also corresponds with the downward sloping trendline (red) from the March 6th highs. Bears are in control now, looking for a move to the bottom trendline near 1.8528. while bulls will be looking for a move back to that level to reload long positions.
EUR/GBP has already broke lower out of its longer-term symmetrical triangle on the daily timeframe. However, today, it spiked lower through horizontal support at 0.8865 before bouncing back above it. This level appears to be the line in the sand for EUR/GBP traders. A break below today’s lows of 0.8837 could Pave the way to horizontal support from April 30th, near 0.8670. However, GBP buyers will be looking for a bounce in the pair to the symmetrical triangle trendline near 0.8918 to add to short EUR/GBP positions.
Although the inflation data today from the UK was better than expected, increasing daily deaths from the coronavirus and its variants could lead to longer lockdowns, and therefore, more stimulus. This, in turn, would theoretically push GBP lower. As several GBP pairs are at or near key decision making levels, that time me be soon!