GBPUSD Before UK CPI and the Bank of England (BoE).

Since the 1.2300 low price has moved higher in a bullish sequence. GBPUSD was pushed higher after a slightly weaker than expected US CPI was released last Wednesday and then pushed lower after the Fed changed its dot plot from implying three rate cuts in 2024 to one. This has possibly made a three wave correction lower known as an expanded flat. How does that help?

The last wave of an expanded flat is made of 5 smaller degree waves. (Think of Russian dolls, a wave within a wave). When calculating the end of the expanded flat the targets are currently between 1.2657 and 1.2590. The retracement support levels are between 1.2620 and 1.2560. So, there is a zone between 1.2620 and 1.2590 where price can be supported by two different methods.

The market is expecting UK CPI to hit the BoE's 2% target on Wednesday at 7am. This may cause some commentators to call for a UK rate cut. The BoE sets rates on Thursday at lunchtime. BBG WIRP gives a 5% chance of a rate cut on Thursday. Would the BoE cut rates two weeks before the UK election? Maybe, maybe not.

So UK CPI could cause GBPUSD weakness to test support levels. Unless CPI is far below 2% it is possible that GBPUSD can bounce off the support levels. It could then be that the uptrend resumes to re-test 1.2895 resistance. On Friday we have PMI readings for direction. On June 28th US PCE is released. Which could give direction again.

If, at any time GBPUSD trades below 1.2300 this will put the bullish narrative in doubt. Lets see what happens.