GBP/USD: impressive CPI but not enough to keep the bears away, fade above 1.2900?

Currently, GBP/USD is trading at 1.2909, up 0.10% on the day, having posted a daily high at 1.2959 and low at 1.2865.

GBP/USD was faded today after printing the highest levels since 10th May with US IP that beat expectations 1% vs expected 0.3% and 0.4% prior. However, the inflation in the UK rose by an impressive 2.7% on a yearly level, beating the 2.6% expected and the prior 2.3%. Month on month came in at 0.5% and surpassing the 0.4% forecast. This will underpin a strong pound as we head into employment data tomorrow and retail sales later this week. 

UK: Surging inflation won't bring forward rate hikes - ING

Also, the euro was stronger earlier and that took the shine off the pound on the cross. "Sterling is virtually flat against the USD and has lost ground on the EUR on the session. UK Gilts are under-performing, lifting spreads in the GBP’s favour very slightly, " explained analysts at Scotiabank. 

GBP/USD levels

The analysts at Scotiabank explained that the short-term technicals are bearish – "Intraday price action in Cable is weak; the GBP fell sharply from early London highs, forming bearish price reversal signals on the 1- and 6-hour charts and leaving the daily picture looking a little soft as well. Cable strength was easily rejected in the 1.2940/50 area again, near yesterday’s high. We look for a test of support at 1.2835/40. EURGBP is firmer and poised to test the 200-day MA at 0.8597."

Fade GBP/USD above 1.2900?

Valeria Bednarik, chief anlayst at FXStreet explained that in the 4 hours chart, technical indicators remain stuck around their mid-lines as the price hovers around a modestly bearish 20 SMA. "The key support is 1.2830, with a break below it favoring a decline towards the 1.2765 region, the base of its latest range. Spikes beyond 1.2900 are now seen as selling opportunities, although the pair can regain its bullish tone on a recovery beyond 1.2960."