Pound Sterling / US Dollar (GBP/USD) closed yesterday with a daily shooting star candle, hence retreating from the highest level since 2009, the pair is eyeing on Britain’s inflation report for the month of January.
As of this writing, cable is being traded near 1.6726. Immediate resistance can be noted around 1.6821, high of yesterday. A break and daily close above 1.6821 might expose 1.6876, high of November 2009, ahead of 1.7041, high of August 2009.
On downside, support can be noted near 1.6687, 23.6% fib level, before 1.6600, psychological level and 38.2% fib level, and then 1.6534, 50% fib level.
A couple of hours later, Britain’s Consumer Price Index (CPI) report – a key yardstick for inflation – for the month of January, is scheduled for release. According to median projection of different analysts, CPI remained broadly unchanged in January as compared to 2% reading in the same month of the previous year. However, Core CPI figure is expected to tick up by 1.9% compared with 1.7% in the corresponding period of last year. A higher than expected reading is seen as bullish for GBP/USD and vice versa.
On Wednesday, the US central bank is due to release Federal Open Market Committee (FOMC) January meeting minutes in which policymakers decided to trim monthly asset purchase program by $10 billion to $65 billion. Investors will be analyzing the minutes of meeting for hints regarding future monetary policy stance of world’s largest economy. In December, we saw very hawkish views from various Fed policymakers regarding stimulus reduction; they wanted to reduce QE on every monetary policy meeting so that the whole stimulus program could end by the end of current year. A similar hawkish stance in January meeting might trigger huge bullish momentum in the US Dollar which is current retreating from multi-month low level.