GBP/USD Price Forecast: 1.2600 Holding Firm as Bulls Eye a Fresh Catalyst
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GBP/USD PRICE, CHARTS AND ANALYSIS:
- Cable Holds Above the 1.2600 handle as Bulls Eye a New Catalyst.
- 1.2470 Holds the Key for Bullish Continuation with a Fresh YTD High Remaining a Possibility.
- Rangebound Trade Between the 1.2500 and 1.2660 Could Continue Ahead of Tomorrows BoE Meeting.
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GBP/USD FUNDAMENTAL BACKDROP
GBPUSD has fluctuated between gains and losses so far this week, keeping in line with the rangebound nature of markets so far. The Asian session has seen modest gains for cable as a renewed bout of Dollar weakness reared its head ahead of the US CPI data release.
The Dollar itself has hovered near multi-month lows with the US debt ceiling impasse providing the Dollar with short-term support. Yesterday's talks between US President Joe Biden and Republican Leader Mitch McConnel reached a stalemate. The ongoing indecision around the debt ceiling continues to weigh on sentiment which has helped the US Dollars haven appeal. Any knee jerk reaction by markets could see a selloff in equities and haven demand rise which could continue to support the US Dollar with Gold and the Japanese Yen likely to rise as well.
The US will release its April inflation data today with consensus for a 0.4% rise MoM with the YoY print forecast at 5%. The core inflation rate is expected to tick lower by 0.1% to 5.5%. There is some fear heading into the US CPI release as last week's jobs data showed an uptick in average hourly earnings. An uptick in inflation could see market participants reprice the probability of rate cuts in the second half of 2023 and provide the dollar with support. Following last week’s FOMC meeting markets were pricing a rate cut as early as July, but that has since changed with markets now seeing rate cuts appearing in September at the earliest.
For all market-moving economic releases and events, see the DailyFX Calendar
Tomorrow, we have the Bank of England (BoE) rate decision which should provide some volatility to GBP pairs. The Central Bank is expected to deliver a 25bps hike tomorrow as the inflation print remains strong. The majority of this however appears to be priced in with the forward guidance and comments from BoE policymakers likely to hold more sway.
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TECHNICAL OUTLOOK AND FINAL THOUGHTS
On the daily timeframe GBPUSD daily candle from yesterday provides an indication of the indecision prevalent at markets at present. A doji candle close on the daily timeframe as cable fluctuated between gains and losses closing the day above the 1.2600 handle.
GBPUSD remains bullish however the RSI is in overbought territory as well. The intraday trend remains bullish as well following a modest rally overnight with rangebound opportunities aplenty ahead of the CPI release. A break above the recent high at 1.2660 could open up a sharp run toward the 1.3000 handle as we have a lack of resistance between the 1.2660 and 1.3000 handles respectively.
I would like to see a deeper correction before the upside rally continues with a test of the 1.2500 level likely providing a better risk-to-reward opportunity for would be longs. A daily candle close below the 1.2470 handle would invalidate the bullish structure.
Key Levels to Keep an Eye Out For
Key support levels:
GBP/USD Daily Chart – May 10, 2023
Written by: Zain Vawda, Markets Writer for DailyFX.com
Contact and follow Zain on Twitter: @zvawda
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.