The British pound hits a two-month high after the inflation data release, but bullish momentum lacks the strength to sustain the gains

Cable surged to a two-month high of 1.2761 on Wednesday following the release of UK inflation data for April, which showed a decrease in price pressure below expectations, dampening speculation for a June rate cut by the Bank of England.

This fresh upward momentum signals a potential continuation of bullish sentiment after the market had traded sideways over the past two days, struggling to break through the significant psychological barrier at 1.2700.

Market participants had adopted a cautious stance in recent sessions, awaiting the April inflation figures, which initially tempered expectations of monetary easing by the BoE starting in June.

The latest advance pushed through a crucial Fibonacci level at 1.2753 (76.4% retracement of the move from 1.2893 to 1.2299), but confirmation of the bullish signal requires a daily close above this level.

Technical indicators on the daily chart remain firmly bullish, with positive momentum, multiple bullish crossovers in moving averages, and the Tenkan and Kijun-sen lines pointing upwards and converging. However, overbought conditions may have contributed to a subsequent pullback from the new high and could continue to pose a challenge for the bulls.

Based on the current technical outlook and recent economic data, any pullbacks are expected to be shallow, ideally remaining above the 1.2700 handle and not surpassing the broken Fibonacci retracement level at 1.2666, in order to maintain bullish momentum for a decisive break above the 1.2753 pivot. Such a move would then target resistance levels at 1.2803 (the lower high from March 23) and 1.2893 (the high of 2024 reached on March 8).

Res: 1.2753; 1.2761; 1.2803; 1.2823
Sup: 1.2700; 1.2666; 1.2635; 1.2602