GBP / USD rebounds to 1.3680-85, the highest level since early November after the US CPI.

• GBP / USD spiked to a more than two-month high during the early days of the American session.
• The latest US inflation figures did little to revive demand for the USD or stall the move.
• Sustained strength beyond a downtrend line will set the stage for further gains.

The pair GBP/USD captured new offers during the early days of the US session and jumped to the highest level since November, around the 1.3680-85 area after US consumer inflation figures.

The headline US CPI rose 0.5% month-on-month in December versus consensus estimates that pointed to a drop of as much as 0.4% from 0.8% the previous month. This was enough to push the annual rate to a new multi-decade high of 7% from 6.8% in November. Additionally, core inflation, which excludes food and energy prices, beat market expectations and accelerated to 5.5% from a year earlier compared to 4.9% in November.

Given that an eventual takeoff by the Fed in March 2022 comes at a full price in the markets, the data did little to impress US dollar bulls. In contrast, a positive risk tone and weaker US Treasury yields continued to dent the dollar’s relative safe-haven status. Aside from this, the hope that the Omicron outbreak will not derail the UK economy acted as a tailwind for the British pound and provided further boost to the GBP / USD pair.

With the latest rally, the pair’s prices rose to resistance marked by a downward sloping trend line resistance extending from the July 2021 high. Tracking buying will be seen as a new trigger for bull traders and traders. they will set the stage for an extension of the recent strong GBP / USD upward movement observed since December 20.

Technical levels