UK’s inflation figures came out to 2.9% beating the 2.8% estimate and previous month’s 2.6% figure. I caught a decent sized move on my EURGBP short trade and also USDJPY long although the latter isn’t relevant to this inflation figures release.
In my earlier post, I listed shorting this trade as it broke through a key level, paused, and looked to trend lower. With the strong UK release, it gave the pound a significant boost making this pair overall bearish.
I will be looking for an opportunity to scale into this trade once again or a similar GBP pair prior to Thursday’s monetary policy statement. Although I do not expect an actual rate hike, the inflation target is kept at 2% while we are nearing 3%. I expect the meeting minutes will have a more hawkish tone signalling the likeliness to raise rates in the near future. This is something to keep an eye out for this week. I am waiting to see some kind of pull back before re-entering my GBP longs.
For the EURGBP pair specifically, I have marked two potential entry zones as shown below:
This is based on the 23.6 and 38.2 Fibonacci retracement levels. In the meantime, this pair is expected to remain quiet as no ECB announcements are to be expected.