GBP/USD stays below 1.3600 ahead of key US CPI

• GBP/USD is trading at 1.3560, Brexit jitters, COVID-19 situation persist.
• The cable took the hit as the US dollar rebounds, the pair may stay flat ahead of US data.
• The cable dealers look for fresh impetus from US inflation, UK GDP data. 

GBP/USD is going through mild losses at 1.3560 during early European trading hours on Wednesday, with the focus on the key US consumer Price Index (CPI) data.

The cable pair is weighed down by a rebound in the US dollar, as the US Treasury yields attempt a recovery amid looming inflation fears. 

In addition to the anxieties rising due to the CPI data, concerns over Brexit and the coronavirus situation in the UK are weighing down the pair. Recently, the currency pair suffered a blow after Irish Foreign Minister Simon Coveney warned about a potential trade war if Article 16 were to be triggered by the UK. 

The cable remains subdued in the second week of November from a five-week low, as investors bet on a rate hike in December after the Bank of England (BoE) surprised the market by leaving policy unchanged this month. However, the UK raised investors’ expectations of a hike but signaled further could come in the coming months. These changes factor in the pair’s trajectory. 

The US dollar has been gaining traction after Tuesday's session and outshined several in a broad basket of currency, with the greenback trading at 94.06, up 0.12% on the day. The US 10-year treasury bond yields have recovered to 1.46%. 

Traders look for impetus from upcoming US CPI data and BOE Silvana Tenreyro's speech scheduled for Wednesday. The focus also remains on the UK preliminary estimate of third-quarter GDP growth on Thursday, which is expected to show GDP growth slowing to 1.5% from the previous quarter amid an unprecedented energy crisis and ongoing supply chain issues. 

Technical Levels

As per the daily chart, GBP/USD has found flooring located around 1.3400, which is supported by the September 30th and October 5th price action. But before testing the said level, the cable pair will first have to break the 1.3449 September 8th low.
The upside challenge has 21-day Simple Moving Averages (SMA), 50-day SMA, both huddling at 1.3680 level. The next thorn is at 100-day SMA 1.3749. Furthest to the north lies the next barrier to the upside at a 200-day SMA of 1.3847.

Additional levels to watch