Sterling gains from UK CPI surpassing expectations by a small margin

The pound saw a rebound from its recent five-month low during early Wednesday trading, spurred by March’s UK inflation figures surpassing expectations. This unexpected rise in inflation alleviates pressure on the Bank of England (BoE) to implement interest rate cuts as soon as next month and bolsters the pound’s value.

While the daily chart reflects a predominantly bearish trend, oversold conditions suggest a potential correction may be in store.

Recent gains breached initial resistance at 1.2477 (representing the 23.6% Fibonacci retracement level of the downward move from 1.2709 to 1.2405). Further hurdles lie ahead at the 1.2500/20 zone (comprising psychological levels, previous lows, and the 38.2% Fibonacci retracement) and 1.2550 (marked by the 10-day moving average and 50% retracement).

However, the latter barrier is expected to cap any upward movement, serving as a ceiling for a healthy correction before the pound resumes its downward trajectory.

Technical indicators such as the death-cross (10-day moving average crossing below the 200-day moving average) and the potential formation of another death-cross with the 20-day and 200-day moving averages align with this scenario, signaling a bearish outlook for the pound.

Res: 1.2498; 1.2521; 1.2550; 1.2578

Sup: 1.2400; 1.2364; 1.2289; 1.2239