just now
Post-CPI breakout turns FVG invalidation into bullish momentum, with GBP/USD holding near 1.36.
- Dovish U.S. CPI and 95.8% Fed rate-cut odds drive USD weakness, boosting sterling.
Technical focus on 1.35079–1.35558 H4 FVG as key pivot for either continuation to 1.37+ or breakdown.
Post-CPI Breakout: From FVG Invalidation to Multi-Week Highs
Sterling has extended its bullish momentum against the U.S. dollar, trading below the 1.36 level after a powerful post-CPI surge. The rally unfolded in a sequence that blended liquidity concepts with macro fundamentals, particularly, CPI as the catalyst for upside.
Earlier this week, we outlined an H1 Fair Value Gap (FVG) between 1.34450–1.34512 as a possible bounce zone.
Price initially reacted positively, but the setup was invalidated when sellers pushed through the lower boundary. This flush served as a liquidity sweep, taking out stops below the recent range and clearing out weak longs.
Instead of collapsing, GBP/USD pivoted sharply after the July U.S. CPI release, which acted as the fundamental catalyst for the reversal. The sweep-and-reverse pattern triggered a burst of buying, sending price into sustained upside momentum and through key resistance levels.
This invalidation is a classic move as upside potential is still capped as the markets await CPI results.
CPI Results & Dovish Impact
The July U.S. CPI release on Tuesday, 12 August 2025 at 20:30 (GMT+8) provided the fundamental spark for GBP/USD’s breakout. The data came in mixed but leaned dovish overall:
| Indicator | Forecast | Previous | Actual | Impact |
|---|---|---|---|---|
| Core CPI YoY | 3.0% | 2.9% | 3.1% | Slightly above forecast but overshadowed by headline miss |
| Headline CPI YoY | 2.8% | 2.7% | 2.7% | Below forecast, sign of easing inflation pressure |
| Core CPI MoM | 0.3% | 0.2% | 0.2% | Softer than expected |
| Headline CPI MoM | 0.2% | 0.3% | 0.3% | In line, no surprise |
- The headline CPI YoY miss at 2.7% vs. 2.8% forecast reinforced the narrative that inflationary pressures are cooling.
- Slightly hotter Core CPI YoY was overshadowed by softer MoM readings.
- The overall tone was dovish, prompting markets to price in a near-certain September Fed rate cut.
September Fed Rate Cut Odds
Following the CPI release, CME FedWatch Tool shows a 95.8% probability, higher than the previous of 94.2% of a rate cut at the September 2025 FOMC meeting, with the target range expected to move from 425–450 bps down to 400–425 bps. Only 4.2% of market pricing remained for a deeper cut to 375–400 bps.
Impact on GBP/USD:
- A high-probability cut weakens USD appeal, especially against currencies backed by more cautious central banks like the BoE.
- Risk-on flows gained momentum as easing expectations reduced dollar demand.
- GBP/USD rallied aggressively as the rate differential outlook shifted further in sterling’s favor.
Technical Outlook: Trading Firmly at Multi-Week Highs
GBP/USD is consolidating just under the 1.36 level, acting as a psychological resistance after a strong CPI-driven breakout. The move has left behind an H4 Fair Value Gap (FVG) between 1.35079–1.35558 that now serves as key near-term support.
Bullish Scenario
GBP/USD is consolidating below 1.36 resistance after its CPI-driven rally, with the H4 Fair Value Gap (1.35079–1.35558) acting as the key decision zone for further upside.
Three main bullish pathways are in play:
- Breakout: If buyers maintain control without a deeper pullback, a clean break and close above 1.36 could trigger immediate continuation toward 1.3700, with further extension to 1.3750-1.380 if momentum holds.
- Pullback: Price may retrace into the H4 FVG (1.35079–1.35558), using it as a launchpad for the next impulsive leg higher. A bullish reaction from this zone - especially if aligned with intraday displacement - would add confluence for a push through 1.3618.
- Deeper Pullback: Test deeper liquidity pockets within the H4 FVG (1.35079–1.35558) and potentially the Order Block zone near 1.35238–1.35157 (also near the 61.8%–70.5% retracement cluster).
Bullish Invalidation:
A sustained breakdown below 1.3500 would weaken this bullish structure and risk a retest of the 1.3443–1.3491 demand zone.
Upside Targets:
- 1.3618 – Breakout trigger level
- 1.3700 – First major target
- 1.3788 – 2025 high
Bearish Scenario
If GBP/USD fails to sustain buying momentum and decisively rejects from the 1.355 support area, price could trigger a deeper corrective leg toward and through the 1.35079–1.35558 support cluster.
Bearish Breakdown Path:
- Price sells off from resistance, retracing through the upper Fibonacci levels and entering the H4 Fair Value Gap zone.
- The 1.35079–1.35558 area fails to hold as support, leading to a breakdown into the Order Block around 1.349–1.350.
- Sellers maintain control, converting the Order Block into resistance.
- This shift could open a path for a sustained drop toward:
- 1.348 – previous breakpoint
Why this scenario is critical:
- A close below 1.350 would signal that bullish structures have been compromised.
- The loss of both the H4 FVG and Order Block would confirm that institutional demand has been absorbed, strengthening the bearish bias.
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