Pound Sterling Price Action Setups: GBP/JPY, GBP/USD, EUR/GBP – DailyFX

British pound price trends ahead of US CPI

• Significant risks loom over us: US CPI, UK GDP
• GBP/JPY shows bullish stance aiming for 2015 highs
• GBP/USD holds firm in the face of biggest event risk – looking for direction
• EUR/GBP triangle pattern reveals mean reversion trend

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Significant event at risk: US CPI, UK GDP

Over the past three trading days, the Pound currency pair has risen today and possibly into tomorrow. December US CPI is expected to reveal further decline in core inflation, while key indicators are expected to rise slightly.

Something to consider in the coming months is the transport disruption occurring in the Red Sea, which is likely to cause shipping companies to pass on higher security/rerouting costs to end consumers, which will affect future CPI statistics. It will appear. Looking at his CPI trends in the US today, it's hard to imagine a scenario where potentially higher inflation leads to any momentum leading to a stronger dollar. The disinflation process is well advanced in the United States, and persistent price pressures are likely to be resolved by base effects.

The outlook for UK GDP is likely to be grim on Friday, with anemic growth expected in November, with the three-month average turning negative (-0.1%).

Customize and filter live economic data via DailyFX economic calendar

GBP/JPY shows bullish stance aiming for 2015 highs

The pound performed differently depending on which currencies it was paired with. In this case, GBP/JPY has performed fairly well since the test of the 200 Simple Moving Average (SMA) and the 78.6% Fibonacci retracement of the 2015-2016 significant decline (179.82).

Essentially, the argument for a policy shift in Japan has subsided as the yen has given up some of its months-long gains after analyzing the weakness in CPI and wage statistics. GBP/JPY subsequently confirmed its bullish rally with yesterday's strong green candlestick emanating from a bullish flag pattern.

The previous resistance at 184.00 has now turned into support, with the 2015 level of 188.80 being noted as resistance. The RSI is approaching overbought territory, but reveals that there is still room to rise before it overheats. The pair has softened slightly today and a move back toward 184.00 could provide a better opportunity for GBP/JPY bulls to evaluate potential long entries.

GBP/JPY daily chart

Source: TradingView, Author richard snow

GBP/USD holds steady ahead of Tier 1 event risk – looking for direction

While GBP/JPY shows a possible bullish bias for the pound, GBP/USD is at a crossroads where its future direction is highly uncertain. This pair achieved higher highs and higher lows. The very definition of an uptrend, but the slope of the movement has leveled off over the past six weeks.

The late December swing high of 1.2828 has not yet been approached, and resistance has appeared around 1.2770, as evidenced by the many tops in this region on the daily candlesticks. Perhaps a softer-than-expected result for CPI could pay off, but it looks like this currency pair really needs some form of momentum to break out of this consolidation pattern.

The price is trading above the 50 and 200 SMA, and the very same lagging indicators have revealed a “golden cross”, a typical bullish phenomenon for trend traders. If you don't retest your swing higher, gravity can come into play and pull the pair towards his 1.2585 before you can evaluate your next move.

GBP/USD daily chart

Source: TradingView, Author richard snow

EUR/GBP triangle pattern reveals mean reversion trend

GBP/JPY has a bullish view on the pound, GBP/USD is mixed (range opportunity) and now EUR/GBP has a more bearish view on the pound. If you look at it with a medium-term lens, you'll see a triangular pattern after the highs and lows.

The movements from the top to the bottom of the pattern so far, or vice versa, have been extreme, and as the pattern narrows, these movements are likely to become more short-lived. If we zoom out further here, it becomes clear that EUR/GBP is trading on either side of the 0.8635 level. This level almost acts as a line of optimality, since it intersects horizontally with the price movement.

The price has recently bounced off the upward trend line support and is heading towards the significant 0.8635 level and may even approach the upper trend line that will act as resistance. But for now, 0.8635 and the 200 SMA remain important hurdles to overcome.

EUR/GBP daily chart

Source: TradingView, Author richard snow

— Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnow