Cable retreats on weaker-than-expected UK data; attention turns to US inflation

Cable dropped 0.35% following weaker-than-expected UK inflation data for July.

Despite the BoE’s anticipation of rising inflation after CPI held at the 2% target for two months, the disappointing July figure has heightened expectations for additional rate cuts, putting pressure on sterling.

The recent decline came after repeated attempts to break through the Fibonacci resistance at 1.2854 (50% of 1.3044/1.2664, also reinforced by the daily Kijun-sen). The pair is now facing increased resistance at the 1.2825/09 range (20DMA / broken Fibonacci 38.2%).

A decisive breach of these support levels could signal a deeper pullback.

While overbought stochastic indicators and rising 14-day momentum in negative territory suggest bearish potential, the positive signals from moving averages in a bullish setup and the rising daily cloud provide some support.

Key levels to watch include the 1.2800 support zone (bearish if breached) and the upper pivots at 1.2854/70 (bullish if cleared).

Attention now shifts to the US July inflation report, expected later today, which will provide insight into the Fed’s future monetary policy actions. Annual CPI is anticipated to remain at 3%, with monthly inflation and core figures (excluding volatile components) expected to rise.

Market reactions could be more pronounced if the July figures deviate from forecasts, while a report in line with expectations might result in less volatility.

Res: 1.2854; 1.2870; 1.2899; 1.2954
Sup: 1.2826; 1.2809; 1.2768; 1.2734