GBP/USD Price Analysis: Descending Wedge Pattern Ahead of UK Inflation Data

GBP/USD oscillates near 1.2420 during the Asian session. The pair found support around 1.2380 and rebounded noticeably. Expectations of significant volatility in the pound arise ahead of the release of UK Consumer Price Index (April) data.

Overall inflation expectations are anticipated to drop substantially from the previous reading of 10.1% to 8.2%. Core inflation is expected to remain steady at 6.2%. On Tuesday, Bank of England (BoE) Governor Andrew Bailey stated, “I think we are closer to the peak than we were,” reiterating the need for cautious use of interest rate hikes as a tool.

The US dollar index (DXY) is poised to break above the key resistance level of 103.62 in relation to the US debt ceiling issue. International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated on Tuesday that the lack of a debt ceiling solution would have adverse effects on the US and global economy. It is hoped that the US debt ceiling issue can be resolved before the 11th hour.

On the two-hour chart, GBP/USD oscillates within a descending wedge pattern, with each retracement being seen as a selling opportunity. However, there is still a relatively high probability of a bullish reversal in GBP/USD. The 50-period exponential moving average (EMA) around 1.2440 is currently acting as a resistance level for GBP bulls.

Simultaneously, the relative strength index (14) is oscillating within the range of 40.00-60.00. The direction of GBP/USD is expected to become clearer after the release of UK inflation data.

If GBP/USD breaks below the low of May 19 at 1.2390, it would further strengthen the US dollar bulls and exert downward pressure on GBP/USD towards the vicinity of the April 10 low at 1.2344, followed by the April 3 low at 1.2275.

On the upside, if GBP/USD rebounds and surpasses the high of May 9 at 1.2640, it could rally towards the 1.2700 level, followed by the significant resistance at the April 26, 2022 high of 1.2772.

GBP/USD Two-Hour Chart:

GBP/USD

Overview

Latest Price: 1.2416

Intraday Change: -0.0021

Intraday Change %: -0.17

Opening Price: 1.2437

Trends

20-day Moving Average: 1.2515

50-day Moving Average: 1.2416

100-day Moving Average: 1.2274

200-day Moving Average: 1.1971

Levels

Previous Day High: 1.2472

Previous Day Low: 1.2414

Weekly High: 1.2547

Weekly Low: 1.2392

Monthly High: 1.2584

Monthly Low: 1.2275

Daily Fibonacci 38.2% Retracement: 1.2436

Daily Fibonacci 61.8% Retracement: 1.245

Key Support Levels: 1.2410, 1.2382, 1.2351

Key Resistance Levels: 1.2468, 1.2500, 1.2527

*The provided information is for reference purposes only and should not be considered as financial advice or investment recommendation.