GBPUSD Prints Fakeout Ahead of CPI

GBPUSD may have just signaled what’s ahead this week with a fakeout at 1.2540.

I mentioned the possibility of a fakeout in Saturday’s Weekly Forex Forecast, including what it could signal for the pound.

In the second chart below, notice how GBPUSD closed Thursday and Friday above the key 1.2540 level only to close Monday’s session below it.

Today’s price action suggests potential weakness for GBPUSD ahead of significant event risk this week, including CPI on Tuesday and FOMC on Wednesday.

We saw a similar fakeout from EURUSD on Friday.

However, this week’s events promise significant volatility, making trading conditions difficult and risky.

Additionally, GBPUSD is still holding above the October trend line.

The level held as support in late May and early June and is less than 100 pips below the current price.

So attempting to short GBPUSD is tricky, if not risky, especially with the upcoming event risk.

But if this fakeout holds, a short from 1.2540 following Tuesday’s CPI figures could be interesting.

I will only take the trade if GBPUSD retests 1.2540 after the CPI volatility hits and if we see significant weakness from the new resistance level.

Trading any market ahead of the CPI volatility is beyond risky.

I will also book profits early and often while GBPUSD is above the October trend line and key horizontal at 1.2440.

Interestingly, 1.2540 is the 50% retracement of Monday’s range.

We’ll see if it holds as new resistance as we head into the thick of this week’s events.

Just remember that the sideline with no open trades is always the safest place to be during volatile weeks like this.

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