GBP/USD: Pullback moves active ahead of UK CPI, PM May’s statement

Oversold RSI conditions trigger the GBP/USD pair’s recovery to 1.2720 as traders await monthly inflation data and PM May’s statement in the UK parliament while heading into the London open on Wednesday.

The Pound dropped yesterday as members of the parliament (MPs) reacted negatively to the Prime Minister Theresa May’s incentive to vote for her Brexit proposal. Those included promise to have a right to conduct another referendum and also have a say on the customs union issue.

PM May will present statement providing details of her 10-point Brexit proposal during the Wednesday’s parliament session.

Be it opposition Labour party’s revolt over little change in the deal or Tory leaders’ problems with the second referendum and customs union, majority of the British policymakers are likely to turn down Mrs. May’s Brexit proposal when it is likely to appear for voting in the week that begins on June 03.

At the economic calendar, April month consumer price index (CPI) data will be the key to watch. The headline price increase gauge may rise to 2.2% from 1.9% on a yearly basis whereas core CPI is likely to register a 1.9% increase versus 1.8% previous readout.

On the US side, political plays surrounding trade deal with China and geopolitical problems with Iran, coupled with FOMC minutes, could direct immediate US Dollar (USD) moves.

Technical Analysis

February month lows near 1.2770/75 could restrict immediate upside of the pair, a break of which can propel prices towards 1.2800 and then to two-week-old trend-line resistance of 1.2870.

Meanwhile, sellers’ rejection of 14-day relative strength index (RSI) condition can lure them towards January 15 bottom around 1.2670 and 1.2600 downside numbers.