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The Pound is Retreating from Local Highs

3/22/2023 10:24 AM

The GBP/USD pair is trading in different directions, testing the level of 1.2230 for a breakdown and developing a weak corrective impetus formed the day before, when the instrument retreated from its local highs from February 2.

Traders today will evaluate the February data on the dynamics of consumer inflation in the UK. Forecasts suggest a slowdown from 10.1% to 9.8% YoY, and on a monthly basis, the Consumer Price Index is expected to rise by 0.6% after falling by a similar amount in January, while Core CPI is likely to remain at around 5.8%. In addition, traders will pay attention to statistics on Retail Price Index: February forecasts suggest an increase in monthly terms from 0.0% to 0.6%, and in annual terms a slight slowdown from 13.4% to 13.2% is expected.

The Bank of England positively assessed the decision of the Swiss authorities to merge the two largest financial institutions of the confederation, UBS Group AG and Credit Suisse Group AG, the latter of which was on the verge of closing due to an outflow of investor funds and insufficient liquidity. According to the Chancellor of the Exchequer Jeremy Hunt, at the moment the British branches of Credit Suisse Group AG have about 5.0 thousand employees, and the bank itself is the largest employer in the investment sector of the City of London.

With the opening of the American session, investors' attention will switch to the US Federal Reserve meeting on interest rates. At the moment, the consolidated forecast assumes an increase in value by 25 basis points to 5.00% per annum. At the same time, the market will focus on the comments of the Chair of the regulator, Jerome Powell, hoping that in the future the Fed may take a break in the current cycle of increasing borrowing costs.

The Bank of England meeting will take place the next day. Analysts predict a 25 basis point increase to 4.25%, but the regulator's decision may be affected by February consumer inflation statistics. The Consumer Price Index in the UK still remains in the region of 10.0%, which is five times higher than the target threshold of the regulator.

Bollinger Bands in D1 chart show moderate growth. The price range is narrowing, reflecting multidirectional nature of trading in the ultra-short term. MACD histogram preserves the uptrend and a relatively strong buy signal (located above the signal line). Stochastic, having reacted to the appearance of corrective decline, retreats from its highs, signaling in favor of the development of a downtrend in the near future.

Resistance levels: 1.2236, 1.2283, 1.2350, 1.2400. | Support levels: 1.2176, 1.2140, 1.2100, 1.2054.

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