Earlier today, official data showed that the U.K. rate of consumer price inflation increased by 0.3% in Feb, missing analysts’ forecasts.

Additionally, although month-over-month consumer prices rose by 0.2% in the previous month, the data disappointed market participants, which pushed GBP/USD under 1.4300. How low could the pair go in the coming days?

In our opinion, the following forex trading positions are justified – summary:

EUR/USD: short (stop-loss order at 1.1512; initial downside target at 1.0572)

GBP/USD: none

USD/JPY: none

USD/CAD: none

USD/CHF: none

AUD/USD: none

EUR/USD

Looking at the weekly chart, we see that EUR/USD moved little lower, which means that what we wrote yesterday is up-to-date:

(…) the key resistance zone (marked with orange and reinforced by the red resistance line based on the Apr and Jul lows) continues to keep gains in check. Therefore, we believe that as long as there will be no breakout above this area lower values of the exchange rate are very likely.

Having said the above, let’s focus on the very short-term changes.

Yesterday, we wrote:

(…) the exchange rate is consolidating in a narrow range inside the blue rising wedge. This suggests that the breakdown under the lower border of the formation (or a breakout above the upper line) will trigger another bigger move. What’s next? Taking into account the proximity to the Feb high and the current position of the indicators (they generated sell signals), we believe that the next move will be to the downside and EUR/USD will re-test the lower border of the green rising trend channel in the coming week.

From today’s point of view, we see that currency bears pushed the pair lower as we had expected. With this move, EUR/USD declined not only under the lower border of the blue rising wedge, but also below the lower line of the blue consolidation, which suggests further deterioration and a drop to around 1.1071, where the size of the move will correspond to the height of the formation. In this area is also the lower border of the green rising trend channel and he green horizontal support line, which together could pause further declines.

Very short-term outlook: bearish

Short-term outlook: bearish

MT outlook: mixed with bearish bias

LT outlook: mixed

Trading position (short-term; our opinion): Short positions (with a stop-loss order at 1.1512 and the initial downside target at 1.0572) are justified from the risk/reward perspective. We will keep you informed should anything change, or should we see a confirmation/invalidation of the above.