GBP/USD is still trapped within a narrow range, but the current sideways movement could end soon after yesterday's bullish engulfing. The pair has edged higher after the ECB meeting and right after the US inflation data as the DXY has plunged.
The US CPI and the Core CPI have come in better than expected but the sentiment remains unchanged. USD remains vulnerable to further depreciation. Moreover, the Unemployment Claims dropped further from 385K to 376K but failed to reach the 370K estimate.
GBP/USD Upside Breakout Favored!
Prelim UoM Consumer Sentiment and the Prelim UoM Inflation Expectations will be released today but I don't think that this data will have an impact on GBP/USD.
Technically, the pair could resume its growth after registering a major bullish engulfing pattern yesterday right at 1.4099. It has found support at the S1 (1.4072) and now is traded above the weekly pivot point (1.4161).
It is also pressuring the 1.4177 and the third warning line (wl3). Stabilizing above this confluence area could announce a potential growth towards new highs. We have a strong resistance area around these levels, so I believe that only a valid breakout through the 1.4241 level could really signal an upside continuation.
Buy GBP/USD if the rate jumps and stabilizes above the 1.4241 level. The upside scenario could be invalidated if the pair drops and stabilizes below the weekly pivot point (1.4161).
R2 (1.4329) and R3 (1.4407) could be used as upside targets if the rate continues to increase.