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This currency pair has been trading quietly over recent hours after beginning to make a reversal about one week ago. The reversal looked like it was technically significant, so would continue, but there is no surprise that it is in no hurry right now. Although it is a cliche, it is quite true to say this could well be the calm before the storm. The GBP/USD currency pair does not always have the strongest market liquidity and so in an active market, it can be prone to strong directional price movements.
The reason for the potentially approaching storm is the slew of high-impact data which we have scheduled for the rest of this week. Today there will be a release of US PPI data, which is an inflation indicator, ahead of actual US inflation data (CPI) which will be released tomorrow. This is usually the most important scheduled data release of all in the Forex market. As for the British Pound, there will be a release of UK GDP data tomorrow, which could move the price. The Pound can also be moved by the ECB policy meeting that will happen today. Of course, it is the US Dollar that is really driving this expectancy of a more volatile market around the corner.
GBP/USD Consolidates Below 1.3570 After Bullish Channel Break
The price has been consolidating within a fairly narrow range over the past couple of days, after breaking bullishly out of a descending price channel and printing significant higher lows. This price action invalidated the support level at 1.3554, but I actually see this as a bullish development in that was very key resistance has just been invalidated. The price is not breaking significant lows, and that must be a bullish sign.
The resistance level at 1.3570 has become more important, and this could well be today’s pivotal point. A further technical reason that it seems to make sense taking a bullish bias here, is that the path of least resistance very much looks to be upwards, with the cluster of closely packed support levels just below starting at 1.3530, plus the confluence with the big round number at 1.3500, supporting that.
Although the bullish price action can be captured within the ascending price channel shown within the chart, I find it a bit unconvincing. If it does exist, the price will need to make a bullish breakout today beyond 1.3570.
GBP/USD H1 Price Chart Showing Consolidation Below 1.3570
Hot US Inflation Could Derail GBP/USD’s Bullish Setup
Should US PPI or CPI inflation data surprise to the upside today or tomorrow, or should Fed speakers reinforce hawkish positioning, dollar strength could resume sharply, catching sterling longs caught between an exhausted bearish setup and a premature bullish pivot. Additionally, the higher-low pattern itself masks a distributional risk: the recovery has occurred on lower volume than the initial breakdown, suggesting that institutional sellers may be lightening positions ahead of clearer directional signals rather than aggressively accumulating. This indicates an anomaly in the bullish consensus—real money may be stepping aside, not stepping in.
GBP/USD Support Levels That Could Invalidate the Bullish Outlook
At what point does the outlook become bearish? I do see 1.3570 as a likely pivotal point, but that is probably not going to be very useful here. A better measuring stick will be whether the price action could overpower the four support levels clustered between 1.3530 and 1.3491 and of course the big confluent round number at 1.3500. If we see the price get established below that range and stay there, this will almost certainly be driven by unexpectedly strong US CPI data tomorrow that would notably exceed an expected unchanged annualized rate of 3.4%.
In the remaining two days to the end of this market week, it is likely we will get a lot more clarity about the US Dollar and therefore the wider Forex market, which is primarily driven by the US Dollar. The CPI and to a lesser extent the PPI data is often a catalyst for institutional orders, even if there is no surprise, as institutions wait to see data before committing if they can. I think there is more potential to the upside technically, so a dovish surprise on US inflation would probably be the most impactful scenario.
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