Forex News: Inflation in the United States improved, as shown by the CPI released yesterday (forecast 0.3%, actual 0.4%) but the US Dollar soon gave up all gains as the pair bounced at 1.1840 support.
The last four hour candle has a very long lower wick, suggesting that the bears have run out of steam and that the pair is headed north. If price moves above 1.1900, which is now resistance, we expect to see a climb into the 50 period Exponential Moving Average but otherwise the pair is most likely headed towards 1.1840 for another attempt to break it. The U.S. economic data released today will probably have a big role to play for price direction.
The main event today will be the release of the U.S. Retail Sales, scheduled at 12:30 pm GMT and expected to show a reading of 0.1%, which is a drop from the previous 0.6%. The indicator shows changes in the total value of sales made through retail outlets and usually has a high impact on the US Dollar, with higher numbers strengthening it.
The Bank of England (BoE) kept the rate unchanged at 0.25% but announced that stimulus tapering is likely to begin during the “coming months”. This was a strong bullish signal that took the Pound more than 200 pips higher.
The massive climb seen yesterday is likely to bring in additional buyers, taking the pair into 1.3450 resistance but if this comes true, it will probably happen next week. For today, we expect a pullback that will re-test the previous resistance at 1.1330 but in case the market overreacted to yesterday’s BoE news, then we will probably see a deeper move south. The RSI is showing bearish divergence again and is approaching overbought, thus increasing the probability of a drop.
The United Kingdom didn’t schedule important economic data releases for today, so price direction will be decided by the U.S. Retail Sales and the technical aspect.