GBPUSD Forecast: Pound Sterling needs to reclaim 1.1400 to attract buyers

• GBPUSD has gone into a consolidation phase following Wednesday’s decline.
• Near-term technical outlook points to a bearish shift.
• US Dollar’s reaction to US CPI data will help GBPUSD determine its next direction.

GBPUSD has started to fluctuate in a relatively tight range on Thursday after having registered large losses on Wednesday. The pair trades below key resistance levels and the technical outlook suggests that buyers remain on the sidelines. Nevertheless, the market reaction to the US October inflation data is likely to provide the next directional clue for the pair.

In the absence of high-impact macroeconomic data releases, the risk-averse market environment allowed the US Dollar to gather strength against its major rivals on Wednesday. Although the US stock index futures trade modestly higher on the day, it’s too early to assume that risk flows have returned to markets. 

The US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for October at 1330 GMT. Investors expect the annual CPI to decline to 8% from 8.2% in September and see the Core CPI edging lower to 6.5% from 6.6%.

In case the annual core inflation reading comes in at or below the market consensus, Wall Street’s main indexes could gain traction and the US Dollar could have a hard time finding demand. In that scenario, GBPUSD is likely to turn north. On the other hand, the pair could extend its slide if investors start pricing in another 75 basis points (bps) rate hike in December on a stronger-than-forecast core CPI print.

The US economic docket will also feature the US Department of Labor’s weekly Initial Jobless Claims data but market participants are likely to stay focused on the inflation report.

GBPUSD Technical Analysis

GBPUSD broke below the 100-period Simple Moving Average (SMA) on the four-hour chart on Wednesday and closed the last five four-hour candles below that level. Meanwhile, the Relative Strength ındex (RSI) indicator on the same chart retreated below 50, confirming the bearish tilt in the short-term technical outlook.

On the downside, 1.1340 (static level) aligns as initial support before 1.1300 (psychological level) and 1.1280 (200-period SMA).

In case the pair manages to reclaim 1.1400 (100-period SMA, 50-period SMA), it could stretch higher toward 1.1450 (20-period SMA, static level) and 1.1500 (psychological level, static level).