GBP/USD and EUR/GBP bolstered by UK inflation print while USD/JPY rises ahead of Powell testimony
UK CPI data this morning has helped to boost the pound against the dollar and euro, while the greenback has risen against the yen ahead of Powell’s testimony to Congress.
GBP/USD
The UK’s inflation rate held at an annual rate of 8.7% in May, according to this morning’s data from the Office for National Statistics.
This has prompted fresh strength in the pound, though caution about how the Bank of England (BoE) will manage inflation without tipping the UK economy into recession remains high. The uptrend in GBP/USD from the lows of May is still in place, with the weakness of the past two days being unwound in early trading on Wednesday.
Further upside targets the $1.30 level, while a reversal back below $1.267 might signal that a more substantial correction was in the offing.
EUR/GBP
Short-term trendline resistance from the May-high continues to limit any upside here for EUR/GBP, despite the big decline seen since the end of April.
If the price continues to respect this, admittedly very steep, trendline, then rallies will be short-lived and we can expect further declines down towards the 84 point level, last see in summer 2022.
A break higher above 85.90 point would be a sign of a potential retracement, though sellers will be watching closely to see signs of a possible lower high.
USD/JPY
USD/JPY reached a seven-month high on Tuesday, and recovered from some overnight weakness.
Jerome Powell’s testimony to lawmakers in Washington today would likely be a crucial moment for the pair, especially given the large gains made since the beginning of May.
While the price faltered yesterday at the late-November high yesterday, the overall bounce is intact, with short-term support from earlier in June helping to support the price. It would need a move back below ¥140.00 to suggest that trendline support has been broken.
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