- GBP/USD corrected lower after advancing to a fresh monthly high above 1.2560.
- The pair faces key technical support at 1.2520.
- Profit-taking ahead of the weekend could limit Pound Sterling's gains.
GBP/USD gathered bullish momentum and climbed to its highest level since May 10 near 1.2570 early Friday. The pair stays in a consolidation phase during the European trading hours and edges lower. In the absence of fundamental drivers, market mood and week-end flows could drive the pair's action.
The US Dollar (USD) came under heavy selling pressure on Thursday after the US Department of Labor's weekly report revealed that Initial Jobless Claims rose to 261,000 in the week ending June 2 from 233,000 a week earlier, highlighting looser jobs market conditions.
As a result, the 10-year US Treasury bond yield retraced a large portion of the gains it recorded mid-week following the Bank of Canada's unexpected decision to raise its policy rate by 25 basis points. The US Dollar Index turned south and lost more than 0.7%, reflecting the negative impact of this data on the USD's performance, while Wall Street's main indexes closed decisively higher.
In the European session, US stock index futures trade mixed and the UK's FTSE posts small gains. Unless risk flows continue to dominate market action in the second half of the day, investors could refrain from betting on a persistent USD weakness ahead of next week's key inflation data and FOMC policy meeting, preventing GBP/USD to stretch higher.
Following Thursday's impressive upsurge, market participants could also look to book their profits, causing GBP/USD to extend its downward correction.
GBP/USD Technical Analysis
On Thursday, GBP/USD surged above the 200-period Simple Moving Average (SMA) on the four-hour chart, located at 1.2480. During that action, the Relative Strength Index (RSI) indicator climbed to 70. Since the RSI holds comfortably above 60, the latest pullback suggests that the pair is making a technical correction, while remaining bullish.
On the upside, static resistance seems to have formed at 1.2560. Once that level turns into support, GBP/USD could target 1.2600 (psychological level, static level) and 1.2650 (beginning-point of the latest downtrend).
The 1.2520 threshold (static level, former resistance) aligns as first support. If that level fails, GBP/USD could stretch lower toward 1.2500 (psychological level) and 1.2480 (200-period SMA).
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.