Article by ForexTime
Sterling moved higher pushing above trend line resistance after the UK reported that July CPI data came in hotter than expected. The +0.1% year over year in the headline, which was up from 0.0% in June was above the average estimate of a flat reading.
What pushed the currency pair higher was that the core reading on the consumer price index moved higher by 1.2% y/y compared to 0.8% last month which was the expectation for July. The increase in underlying inflation excluding food and energy was generated by a year over year price decline in clothing prices coming in less than a year ago. Prices at the wholesale level also came in stronger than expected at -12.4% year over year from -13.1% in June.
The GBP/USD pushed above horizontal trend line resistance at 1.5690, and is poised to test the June highs near 1.59. Interest rate differentials moved in favor of the pound, and Monday’s softer than expected release of the Empire Manufacturing survey did not do the greenback any favors.
Momentum on the currency pair has turned positive as the MACD (moving average convergence divergence) index generated a buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal.
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