Can be deflation in UK?!

[walid]

It has been painful for the sterling to watch UK CPI falling yearly for the first time since 1960.
The cable has slumped today to 1.5447, as Apr UK CPI has fallen by 0.1% year on year while the market was waiting for zero change as the same as March.
And over the producing level, April UK PPI Output n. s. a came also today showing falling yearly by 1.7% as the same as March and the expectations was referring to falling by 1.6%, while the core figure rose by only 0.1% as expected as the same as March and also Mar UK PPI input n. s. a declined by 11.7% y/y and the consensus was referring to falling by 11.5% after collapse in March by 13% has been revised to be by 12.8%y/y
While UK DCLG housing price index could show rising by 9.6% yearly and the median forecast was pointing to 7.7% after increasing in March by 7.2%.
These weak UK inflation data do not assume only holding of the current accommodative monetary stance without tightening but also suggest higher probability of easing further amid the current relatively weakened energy prices and the recent GBP appreciation which can dampen the inflation expectations further.
As Andrew Haldane who is the chief economist of BOE has signaled previously saying that there is a possibility of watching lower interest rate for propping up the inflation in UK on BOE commitment, as the inflation rate has become far below its yearly 2% target.
From another side, the greenback could be boosted today by the release of April US Housing Starts which have shown seasonally adjusted increasing by 1.135m yearly in April adding trust in the US housing market by rising by the strongest yearly pace since November 2007.
The cable which reached 1.5815 last Thursday has started its bottoming out on last Apr. 13 at 1.4566 to be followed by forming a higher low on May. 5 at 1.5089 to hold the pair back from falling again under the pressure of the trendline resistance which is extended from 1.7191 to 1.5552 whereas it has ended its previous rebound from 1.4950.
GBPUSD came down today below its 200-SMA again, after it could get over it last week for the first time since last Aug. 20.
The pair daily Stochastic Oscillator (5, 3, 3) which is sensitive to the volatility is now in the neutral area coming down from the overbought area above 80 by both of its main line and its signal line and also its daily RSI-14 which is less sensitive to the volatility is in the neutral territory coming down from the overbought area above 70 reading now 57.683.
God willing, the cable can meet its way of falling supporting level at 1.5150 which can be followed by 1.5089 which supported the pair in the beginning of last week, before meeting 1.50 psychological level which can be followed by 1.4960, before 1.4854 which can fall to open the way for meeting 1.4812 which can be followed by 1.4701, before 1.4603 which can be followed by its formed bottom on this Apr. 13 at 1.4566 to protect 1.45 psychological level which can fall to open the way to another supporting level at 1.4346, before May 2010 low which has been at 1.4227.
While the way for rising back can be faced by today formed intermediate resistance at 1.5670, before facing 1.5815 which capped its rising on May. 14 to keep its formed peak on last Nov. 27 at 1.5826 from falling to open the way for higher resistance at 1.5945, before 1.60 psychological level.

Kind Regards
FX Market Strategist
Walid Salah El Din
Mob: +20 12 2465 9143
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