05/22 WEDNESDAY | 08:30 GMT | GBP CONSUMER PRICE INDEX (APR)

The rebound in oil prices in the first four months of 2019 has been a driving factor behind the rebound in inflation readings across the world in recent weeks, and the forthcoming April UK Consumer Price Index should fit this pattern. According to a Bloomberg News survey, the upcoming April UK inflation report is forecast to show headline inflation due in at 2.2% from 1.9% (y/y), while the monthly reading is due in a 0.7% from 0.2%. Core CPI is expected to have increased to 1.9% from 1.8% (y/y).

With Brexit tensions running high again ahead of the European parliamentary elections this week and perhaps the last-ditch effort by UK Prime Minister Theresa May to save the EU-UK Withdrawal Agreement next week, it seems likely that economic data will remain out of the spotlight in the days ahead. In other words, any Brexit-related developments would quickly overwhelm any reaction to the April UK inflation report this week.

Pairs to Watch: EURGBP, GBPJPY, GBPUSD

GBPJPY TECHNICAL ANALYSIS: DAILY PRICE CHART (DECEMBER 2017 TO MAY 2019) (CHART 1)

(Click on image to enlarge)

On May 8, GBPJPY prices started to breakout of their sideways consolidation dating back to mid-February, closing below 143.78 for the first time since February 18. Since then, bearish momentum has been strong, with no close back above the daily 8-EMA going back to May 6. Both daily MACD and Slow Stochastics continue to push lower in bearish territory as GBPJPY prices have cleared out the February swing low at 141.01.

With the daily 8-EMA currently at 141.31, there is a strong resistance zone overhead to watch at the start of the week: if GBPJPY moves back above the 141.01/31 area, then it stands to reason that the recent selloff move has reached its exhaustion point. Until GBPJPY moves back above the daily 8-EMA, however, the price forecast remains bearish.

IG CLIENT SENTIMENT INDEX: GBPJPY (MAY 20, 2019) (CHART 2)