GBP/USD Forecast: holds within one-month old ascending trend-channel, FOMC minutes awaited
|The US Dollar consolidated overnight strong recovery gains as investors now look forward to the FOMC meeting minutes to reaffirm June Fed rate-hike expectations. The greenback bounced off multi-month lows despite of mixed US economic data, which continued fueling concerns that slowing economic growth might hold the Federal Reserve from adopting aggressive rate-tightening cycle. In the latest US data, the IHS Markit flash services PMI rose to a four-month high but got offset by manufacturing PMI, which fell to its lowest level in eight months, and new home sales data that fell short of expectations.
Today's US economic docket features the release of existing home sales data but investors' focus would remain glued to the release of May FOMC meeting minutes, which is likely to act as a key driver of the markets’ near-term momentum.
The pair has managed to bounce of Tuesday's lows near mid-1.2900s, touched in the aftermath of a suspected terrorist attack in the city of Manchester, and is now trading with minor gains for the first time in three trading sessions. There are now macroeconomic data due for release from the UK and hence, the USD price-dynamics would remain an exclusive driver of the pair's movement on Wednesday.
Technically, the pair seems to have turned neutral and might continue oscillate within a short-term ascending trend-channel formation. Currently trading around 1.2975 region, the key 1.30 psychological mark now seems to act as immediate resistance above which the pair could extend the up-move towards multi-month highs resistance near 1.3040-45 region. The ascending trend-channel resistance, currently near 1.3075 region, might continue to cap any further up-move ahead of the UK general election and impending Brexit negotiations.
Conversely, on a sustained weakness below 1.2950 level, the pair seems more likely to head towards testing the channel support, currently near the 1.2900 handle, which if broken should pave way for near-term corrective slide. Below the said handle, the pair is likely to accelerate the slide towards 1.2850-45 horizontal support before eventually breaking below the 1.2800 handle towards testing its next major support near 1.2770-65 region.
The pair seems to have lost its upside momentum, despite of Tuesday's stronger EZ PMI prints and impressive German Ifo data, and broke below a short-term ascending trend-line support, confirming a bearish 'rising wedge' chart pattern formation on 1-hourly chart. The pair subsequent dropped below the 1.1200 handle and is currently hovering just above 1.1165 immediate support, marking 23.6% Fibonacci retracement level of its recent up-move from 1.0839 to 1.1268 touched yesterday. Investors now look forward to a scheduled speech by the ECB President Mario Draghi for fresh clues over the central bank's near-term monetary policy outlook. Against the backdrop of recent positive momentum in the region's economic activity, slight hawkish comments could spark a fresh leg of bullish momentum for the shared currency.
From a technical perspective, break below a bearish formation now seems to point towards further corrective slide in the near-term. Hence a follow through weakness below 1.1165 immediate support has the potential to drag the pair towards 1.1130-25 en-route the 1.1100 handle and its next major support near 1.1070-65 area.
On the flip side, momentum back above the 1.1200 handle now seems to confront resistance near the pattern support break-point, now turned resistance, near 1.1230 level. Any further up-move beyond immediate resistance now seems to be capped at mid-1.1200s resistance area and only a decisive move above this strong hurdle would negate expectations for a near-term corrective slide.
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