GBP/USD hits fresh 3-wk high on higher CPI; targets 1.5952 (R1) before 1.5996/1.6104 (R2)

By | December 14 2010 12:27 PM

The British pound strengthened on Tuesday on a higher-than-expected inflation reading for November, with the sentiment also supported by a view that the US Federal Reserve may expand its bond buyback program at its monetary policy later in the day, supplying more dollars into the system.

If it loses ground, first target could be 1.5650 (S1) before 1.5480 (S2) and 1.5290/1.5300 (S3).

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GBP/USD, which has been steadily rising after hitting its channel bottom on November 30 at 1.5483 jumped as high as 1.5909 on Tuesday, its highest since November 23 and up 0.3 percent from its previous close.

The pair that had dropped more than 2.9 percent in November was up 2.24 percent so far this month, at its session's high. At 12:15 pm GMT, GBP/USD was at 1.5860, paring most of the day's gains.

The pair is now struck between the 50-day and 100-day SMAs and is aiming 1.5952 as first resistance (R1) before entering the 1.5996/1.6104 region (R2), which falls just under the 76.4 percent Fibonacci retracement from 1.5483 to 1.6297. Above that, the pair may have a stop around 1.6297 (R3) before rising further.

If it loses ground, first target could be 1.5650 (S1) before 1.5480 (S2) and 1.5290/1.5300 (S3).

National Statistics said Tuesday that UK's headline inflation rose 3.3 percent year-on-year in November, against market expectations of a 3.2 percent rise. Retail price index also jumped 4.7 percent on year in the same month, beating analyst expectations of 4.5 percent.

Before the Fed policy announcement at 7:15 pm GMT, there are key data such as producer prices and retail sales (both for November) from the US, due at 1:30 pm.

If it loses ground, first target could be 1.5650 (S1) before 1.5480 (S2) and 1.5290/1.5300 (S3).