GBP/USD Forecast: 1.2500 proves to be a tough resistance to crack

GBP/USD has been having a hard time clearing 1.2500.
The near-term technical outlook favors the bulls ahead of key US data.
Risk aversion could cause the pair to stretch lower ahead of the weekend.

Eren Sengezer FXStreet

GBP/USD has edged slightly lower after having failed to clear 1.2500 for the third straight day on Friday. The near-term technical outlook doesn't yet point to a buildup of bearish momentum. In the second half of the day, risk perception and key macroeconomic data releases from the US could drive the pair's action.

Although the data from the US revealed on Thursday that the economy expanded at an annual rate of 1.1% in the first quarter, compared to the market expectation of 2%, the US Dollar (USD) stayed resilient against its rivals. The significant negative contribution of 2.26 percentage point of the change in private inventories to the GDP showed that the US economy has performed better than what the data suggests. Furthermore, the details of the report showed that consumer activity remained healthy despite strengthening price pressures in Q1.

Early Friday, the US Dollar Index builds on Thursday's modest gains and doesn't allow GBP/USD to regain its traction. Meanwhile, US stock index futures trade in negative territory, reflecting a risk-averse market environment.

In the second half of the day, the Personal Consumption Expenditures (PCE) Price Index for March, the Federal Reserve's preferred gauge of inflation, from the US will be featured in the US economic docket. Since the quarterly reading of the PCE inflation data was already revealed in Thursday's GDP report, this data is unlikely to trigger a significant reaction.

Market participants will pay close attention to Employment Cost Index data for the first quarter, which is expected to come in at 1.1%. A stronger-than-expected print could help the USD gather further strength ahead of the weekend and vice versa. A negative opening in Wall Street could also provide additional support to the USD and weigh on the pair.

It's also worth noting that month-end flows on the last trading day of April could ramp up volatility toward the end of the European session and cause usual inter-market correlations to weaken.

GBP/USD Technical Analysis

GBP/USD faces key support at 1.2450, where the 50-period and the 100-period Simple Moving Averages (SMA) on the four-hour chart are located. A four-hour close below that level could open the door for an extended slide toward 1.2400 (psychological level, static level) and 1.2370 (200-period SMA, Fibonacci 23.6% retracement of the latest uptrend).

On the upside, buyers could show interest in case GBP/USD rises above 1.2500 and starts using that level as support. In that scenario, 1.2550 (end-point of the uptrend) and 1.2600 (psychological level) could be seen as next bullish targets.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD consolidates near 0.7000 as USD stays weak

AUD/USD holds steady above 0.7000 during Thursday’s Asian session, consolidating the previous day’s recovery gains from a near three-week low as the Democratic sweep in the US midterm elections and Iran diplomacy hopes continue to weigh on the US Dollar. Bulls, however, seem hesitant as focus shifts to Friday’s crucial US NFP report.

USD/JPY drifts lower to 158.25 on hawkish BoJ Minutes, weak USD

USD/JPY trades with a negative bias for the second straight day on Thursday as hawkish BoJ Minutes, showing members agreed to keep raising rates, and intervention risks support the Japanese Yen. Meanwhile, US midterm election results and hopes for Iran diplomacy keep the US Dollar depressed as focus shifts to Friday’s US NFP report.

Gold consolidates gains around $4,100

Gold now surrenders part of its initial bull run, although it sticks to the $4,100 region per troy ounce on Thursday. The yellow metal extends it recovery on the back of the lacklustre performance of the US Dollar and declining US Treasury yields following the US midterms elections.

Bitcoin falls below $76,000 as NASDAQ drops 5% on AI sell-off

Bitcoin (BTC) and the wider crypto market fell on Thursday as US markets opened. Losses in AI-related stocks pushed the NASDAQ Composite (IXIC) down as much as 5% amid concerns that Democrats' control of both chambers of the US Congress could lead to tighter crypto and AI regulations.

NFP stress test: Six payrolls releases, measured in daily-loss limits

Friday's US employment report is usually previewed in terms of the headline number and the reaction in the Dollar. For a growing group of traders, those running funded or evaluation accounts with a fixed daily loss limit, there is a more practical question: how much of that limit can the first hour consume, regardless of direction?

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.