GBP Tests Support, What’s Next?

Dear Traders,

It came as it had to come in the GBP/USD: The British pound retreated from its highs and corrected some of its recent gains. Before yesterday’s pullback happened, we saw the pound touching a fresh post-Brexit high at 1.4377 but the U.K. employment report put an end to the cable’s rally. As we warned traders yesterday, the pullback was inevitable given the overbought situation in the GBP/USD. The job report was, however, generally positive and likely to keep the Bank of England on track to raise interest rates next month.

Today we have the U.K. Consumer Price Report scheduled for release at 8:30 UTC. If inflation numbers come in weaker than expected, the pound could drop towards 1.4230/20. A significant break below 1.4220 could even open the door for a larger decline towards 1.4150. If the pound sterling is, however, able to gain ground above 1.43, buyers may take the opportunity to buy pounds at lower levels with a higher target at 1.4420.

The euro’s climb above 1.24 had been brief while the pair EUR/USD was unable to hold above that important threshold – at least for the time being. With the 1.24-barrier being a hart nut to crack, we now focus on the 1.2350-support which is equivalent to a rising trendline of the recent uptrend channel. Euro bulls should pay attention to a break above 1.2425 which could justify accelerated bullish momentum towards higher targets.

The Eurozone Consumer Price report is scheduled for release at 9:00 UTC but as long as there is no surprise in the headline figure, the report’s impact on the price action could be limited.

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