British pound rally gains steam but a healthy correction likely

The euro rallied today after relatively strong inflation data from Germany. According to Destatis, the country’s headline consumer prices increased by 0.8% in January, higher than the previous month’s increase of 0.5%. This increase led to an annualised gain of 1.0%. The harmonised CPI increased by 1.4% and at an annual pace of 1.6%. The statistics office attributed this to the return of some taxes that were waived last year because of the pandemic. In Sweden, the Riksbank decided to leave interest rates unchanged in its first meeting of the year.

The price of crude oil rose today as investors continued to focus on the ongoing stimulus deliberations in the United States. In the past few days, the Biden administration has been trying to reach a deal with some decisive moderates. If passed, the stimulus will add to the ballooning US national debt. However, it will be positive for oil prices because it will lead to higher demand. The price is also rising after the relatively bullish inventories numbers by the American Petroleum Institute (API). The data showed that the country’s inventories fell by more than 3.5 million barrels. Later today, it will react to the official inventories numbers.

The US dollar continued declining today, continuing a trend that started on Friday after the US released the employment numbers. The currency declined against most developed world currencies. According to the Bureau of Statistics, the headline consumer price index (CPI) rose by 0.2% in January leading to an annualised increase of 1.5%. This was better than the previous month’s increase of 1.6%. The core consumer price index data rose by 0.3% leading to an annual increase of 1.5%. 

EUR/USD

The EUR/USD price continued rallying today after the German CPI data. It rose to an intraday high of 1.2136, which is still above the Ichimoku cloud and the descending trendline on the four-hour chart. The Relative Strength Index (RSI) has also continued to rise while the strong momentum of Bulls Power has started waning. Therefore, the pair will likely experience a pullback in the near term.

XTI/USD

The XTI/USD pair is hovering near its highest level since last year because of stimulus and inventories numbers. The price is above the 25-day and 15-day moving averages. However, oscillators like the momentum and the Relative Strength Index (RSI) have started forming a bearish divergence pattern. Therefore, there is a possibility of a healthy pullback in the near term.

GBP/USD

The GBP/USD price continued rallying today mostly because of the overall weak US dollar. On the hourly chart, the price has already moved above the important resistance at 1.3753. It is also above the Ichimoku cloud and is along the upper side of the Bollinger Bands. Therefore, like the XTI/USD pair, there is a possibility of a healthy correction in the near term.