- GBP/USD has resumed its uptrend as markets reassess concerns about tighter policy from the US Fed.
- UK Retail Sales smashed estimates and additional data points may also be favorable to cable bulls.
- Friday's four-hour chart is pointing to further increases.
"The economy has a long way to go" – that has been the Federal Reserve's mantra in recent months, and after a short distraction, it has returned to dominate the dollar's decline. Officials at the world's most powerful central bank – with the exception of Dallas Fed President Robert Kaplan – have all repeated the dovish message. It has sunk in.
The greenback gave back some ground it gained after the Fed's meeting minutes showed that some members conditionally supported having a discussion about printing fewer dollars at some point. Despite the subtlety of that single passage in the protocols, the currency bounced late on Wednesday before fading away.
Weekly US jobless claims marginally beat estimates, failing to stop the dollar's slide, and the focus on Friday is on Markit's preliminary Purchasing Managers' Indexes for May. Existing Home Sales and a speech by the Fed's Mary Daly are also eyed. It would probably take extraordinarily strong American statistics to trigger another upswing in the greenback.
On the other side of the pond, sterling also has its reasons to rise. Retail Sales figures for April have shown a leap of 9.2%, far above expectations and joining a winning streak of British economic publications this week. Earlier on, the UK reported a surprising drop in the unemployment rate to 4.8%. Markit's PMIs will likely show significant optimism among businesses.
What can derail the rally? The strain of COVID-19 first found in India remains of concern as it is spreading fast in the UK. However, all the evidence has shown that vaccines beat this variant and there are good chances that the next stage of Britain's reopening remains on course on June 21. On Monday, the UK loosened several restrictions.
All in all, there is more room for cable to rise.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) on the four-hour chart is well below 70, allowing room for the currency pair to rise. Moreover, after a dip below the 50 Simple Moving Average, GBP/USD shot higher and momentum remains to the upside. Overall, bulls are in control.
The daily high of 1.42 is the first line of resistance, and it is followed by May's peak of 1.4220 and finally by the 2021 top of 1.4240. Further above, 1.4360 awaits in the distance.
Some support is at 1.4160, which capped cable earlier this month. It is followed by 1.41, then by 1.4075 and 1.4050.
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