GBP/USD
Yesterday, the UK inflation data came out weaker than expected. The Core CPI edged higher by 5.1% YoY in January, missing estimates of 5.2%. On a monthly basis, core CPI slid to -0.9%, against expectations of -0.8%. Month-on-month, the headline CPI fell to -0.6% (forecast -0.3%), and on an annual basis, it also remained at 4.0% against forecasts of an increase to 4.1% YoY. Furthermore, retail prices and housing prices declined. As a result, the pound fell by 27 pips.
Today, the UK will release several reports. GDP for the 4th quarter is expected to grow by only 0.1% YoY, compared to 0.3% YoY in the previous period, due to a contraction of GDP in the 4th quarter by 0.1%. The consensus estimate for December is expected to be -0.2% MoM. Industrial production for December is expected to contract by 0.1%, and the trade balance is expected to worsen from -14.2 billion pounds to -15.0 billion pounds.
In the US, industrial production for January is expected to increase by 0.2%. Market players expect mixed indicators for retail sales. Based on these preliminary data, we expect the pound to fall further.
Yesterday, the pound fell slightly short of the target support at 1.2524 and showed a corrective move with its weak growth. From a technical perspective, this helps us with confirming the main bearish scenario since the risk of forming a convergence with the oscillator has been eliminated. At the same time, we see the price moving below the level of 1.2610 and below the MACD line (blue). Overcoming the support level of 1.2524 paves the way for the price to reach the target at 1.2373.
On the 4-hour chart, the price is moving below the balance and MACD indicator lines, with the Marlin oscillator in downtrend territory. We are waiting for the price to consolidate below 1.2524 to reveal the main scenario. If the pound strengthens above the level of 1.2610, this will delay the main plan.
