Next week brings crucial events with the UK CPI report and the Bank of England's interest rate decision following the day after. The Pound has been holding its ground for a while but finally gave way on Friday as the Dollar started gaining against most currencies.
Time Frame D1
On the daily chart (D1), we see a clear breach of support at the 1.268 level. When adverse data is not a given, it's common for high levels to be maintained until data is released. However, if the Dollar continues to strengthen across the board, will the Pound be able to withstand the pressure?
Time Frame H1
On the hourly chart (H1), there's a notable halt in the decline, with the daily candle (D1) showing a significant lower wick. This suggests there might be an attempt to revert back to the 200 SMA, which remains relatively flat. A pre-data bounce seems plausible, particularly if institutions have been holding the Pound at higher levels to sell at attractive prices if UK CPI falls.
Time Frame M15
The 15-minute chart (M15) shows the Pound gaining before and at the start of the session, but weakening during the second part of the US session. If the Pound resists during the Asian or European sessions, a bounce is possible. However, if the overall market declines against the Dollar, the Pound might also give in.
Expectations are that UK CPI will increase, providing a pretext to maintain or even elevate the Pound's level before key data is released. Caution is therefore advised.
Economic Calendar for Next Week:
Key data that could impact the market includes:
Tuesday: US Retail Sales data.
Wednesday: UK CPI data, the day before the UK's interest rate decision.
Thursday: SNB and BoE interest rate decisions.
Friday: US PMI data.
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