GBP/USD Bulls Threatens 1.5000 as Bears Remain in Control!

The British pound rebounded from a [B]five-year low[/B] against the dollar as investors looked ahead to CPI reports for both, the US and UK, which could shed some light on the Fed and BoE [B]rate hike[/B] speculations. The headline year-over-year inflation rate is expected to drop to 0.1 percent in February, the [B]lowest since 1990[/B], while the core is expected to remain at 1.4 percent. Noted that is very remarkable that the CPI is falling while the job growth is surging. If we see a disappointment in the data, then I would expect to see a lot more pressure on the 1.4850 level, with the pair currently stuck in the 1.4700 – 1.5000 range. The [B]GBP/USD[/B] pair has been trading in this range for ten days now so it’s going to take a significant push to break out of here, with a break to the downside looking more likely, as the market expects the inflation to fall further away from BoE’s [B]2 percent target[/B].

On the other hand, the [B]US CPI[/B] for February is expected to remain below zero and at -0.1 percent mainly because of low oil and import prices.

Technically, we have said that a close above the psychological level of 1.5000 would be a very bullish development for the pound, as we have not seen a daily close above that level since early March. With the US and UK CPIs coming later in the day, we could expect any kind of reaction as the [B]CPI [/B]data will determine the pair’s move and trend direction.

The correction saw the pair close to around the key support level of 1.4635 towards the 1.4990 barrier, which technically speaking could be viewed as quite [B]bullish [/B]given the fact that it was a strong pullback. The [B]strength [/B]seen in the pound the last couple of sessions, which held it above the key support levels of 1.4600 and 1.4700, has suggested some signs of recovery and thus the key resistance zone of 1.4990 – 1.5030, will be a significant one for the pound [B]bulls[/B].

Bearing the above in mind, if we see a [B]close above[/B] the key resistance level of 1.5000, then we could see a bigger retracement, following eight negative months for the pound, prompting a more aggressive move towards the [B]1.5150[/B] level. This level is significant as it includes the 23.6% Fibonacci retracement level as well as the upper boundary of the upward sloping channel, which started few days ago. However, for [B]confirmation [/B]of the trend reversal, we will need to see a break above the key resistance level of 1.5500, which includes the 38.2% Fibonacci retracement level, from March 2015 lows to July 2014 highs, therefore it’s a long way until we reach this level.

Alternatively, given how aggressive the rally has been over the last few months, we could see a brief period of [B]consolidation [/B]between 1.4630 and 1.5000.