UK Inflation Surprise: Will Bears Seize Control of the Market?

The pair trades flat despite upbeat UK CPI. Intraday bias remains bearish as long as resistance 0.8380 holds. It hit an intraday low of 0.82710 and is currently trading around 0.82844.

Inflationary Pressures in Detail

The UK Consumer Price Index (CPI) went up to 3.0% in January 2025, higher than expected. Core CPI, minus volatile components, increased to 3.7%.

The greatest positive contributions towards the change in CPI during the month were transport, food, and non-alcoholic beverages, while housing and household services provided negative contributions. The monthly CPI fell by 0.1%.

This above-expectation inflation might lead to the Bank of England reducing planned future interest rate reductions, given that inflation stays considerably higher than the 2% level. New forecasts anticipate each quarter rate decrease throughout 2025, dropping the base rate to approximately 4% towards the end of the year

Technical Analysis

The pair is currently trading below the 34- and below 55-EMA on the 4-hour chart.

• Bearish Trend Confirmation: Any break below 0.8260 confirms an intraday bearish trend. A drop to  0.8220/0.8190 is likely.
   
• Near-Term Resistance: Current resistance is around 0.8300. Any violation above will push towards 0.8340/0.8380/ 0.8400/0.8450/0.8470/0.8500/0.8580. The bearish outlook would be invalidated only if the price goes above 0.8500.

Indicator Analysis (4-hour chart)

• CCI (50): Bearish
   
• Average Directional Movement Index: Bearish

Trading Recommendation

It is good to sell on rallies around 0.8300  with a stop loss around 0.8340 for a target price of 0.8220.