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  • Sterling still struggling to find bullish momentum ahead of UK CPI figures.
  • Hefty data dump for the UK today could see muddling of market reactions if results are broadly mixed.

The GBP/USD continues to trade along the bottom, drifting around the 1.3400 major level ahead of Wednesday’s London session.

After several days of thin data, the GBP sees an active Wednesday with a slew of data dropping early at 08:30 GMT, kicking off with the Retail Price Index, which is expected at 3.4% (last 3.3%) for the year-on-year figure. A smattering of Produce Price Index figures also drop, with the PPI – Input figures for April expected at 1.0% (last -0.1%). The big figures for today will be the UK’s CPI figures, with the year-on-year Core Consumer Price Index for April expected at 2.2%, a slight contraction from the previous reading of 2.3%.

As noted by Nomura in their CPI preview for the UK session,  “Clothing and footwear, alcohol and tobacco, and personal care/insurance each took around 0.1pp off CPI inflation in March. We see inflation remaining at 2.5% despite those moves partly reversing and petrol prices rising. A 0.9pp wedge means a small rise in RPI inflation from 3.3% to 3.4%.”

FXStreet’s Yohay Elam developed a trade plan for the upcoming CPI figures, and as he noted, if the numbers come out better than expected, “If it comes out at higher than expected with a relative deviation of +1.66 or higher (2.65% or higher in actual terms), the pair may go up reaching a range of 38 pips in the first 15 minutes and 82 pips in the following 4 hours.

GBP/USD levels to watch

As noted by FXStreet Chief Analyst Valeria Bednarik, “technically, the 4 hours chart shows that a bearish 20 SMA keeps containing advances, now at around 1.3450, while technical indicators remain within bearish territory, the RSI lacking directional strength at 42 and the Momentum advancing modestly, all of which maintains the risk leaned to the downside.”

Support levels:  1.3390 1.3355 1.3320

Resistance levels: 1.3450 1.3490 1.3520