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GBP/USD Forex Signal: Sits at Key Resistance Ahead of UK CPI Data

Bullish view

  • Buy the GBP/USD pair and set a take-profit at 1.2750.
  • Add a stop-loss at 1.2635.
  • Timeline: 1-2 days.

Bearish view

  • Set a sell-stop at 1.2685 and a take-profit at 1.2600.
  • Add a stop-loss at 1.2750.

GBP/USD Signal Today - 20/05: UK CPI Data Ahead (Chart)

The GBP/USD surged to its highest point since March ahead of the crucial UK retail sales and inflation data. It rose to the important psychological level of 1.2700, much higher than last month’s low of 1.2298.

UK inflation and retail sales data ahead

The GBP/USD pair surged hard after the US published weak economic numbers. Inflation dropped slightly in April, with the core CPI falling to 3.6%. Retail sales slowed for the third straight month while manufacturing and industrial production remained in the negative zone.

Before that, more data revealed that the country’s consumer confidence data dropped for the sixth straight month. Most importantly, numbers by the Bureau of Economic Analysis (BEA) showed that the economy expanded by just 1.6% in Q1.

The Fed’s key challenge is that inflation remains stubbornly above its 2.0% target rate. As such, while a rate cut will help to stimulate the economy, it will increase the possibility of higher inflation for longer.

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    The focus among traders this week will be on the crucial UK economic numbers. Economists believe that the country’s inflation tumbled in April. The headline Consumer Price Index (CPI) data is expected to come in at 2.1%, down from 3.2% in the previous month

    If this is correct, it will be the slowest inflation rate in over two years. It will also be near the Bank of England (BoE) target of 2.0%. However, analysts still expect the core CPI to come in at 3.6%, much higher than the target.

    The ONS will also release the latest retail sales data on Friday. Economists expect the report to show that sales dropped by 0.6% in April after remaining flat in March.

    These numbers will likely impact the Bank of England (BoE) in its next meeting in June. The base case is that the bank will slash interest rates by 0.25%.

    GBP/USD technical analysis

    The GBP/USD exchange rate continued rising and is now at a crucial resistance level. It was trading at 1.2700, its highest swing on May 16th and April 9th. It has also flipped the resistance at 1.2635 (May 9th high) into a support.

    The pair has moved above the 25 and 50-period Exponential Moving Averages (EMA) and the first resistance of the Woodie pivot point. Also, the MACD indicator has moved above the neutral point. Therefore, the outlook is bullish, with the next reference level to watch being at 1.2750, its third resistance point.

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    Crispus Nyaga
    About Crispus Nyaga
    Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube,, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

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