GBP/USD Forecast: Near-term consolidation likely for Pound Sterling
- GBP/USD has staged a downward correction toward 1.2300.
- Risk flows could limit USD's recovery gains on Wednesday.
- Consumer Credit in the UK declined less than expected in February.
After having met resistance at 1.2350, GBP/USD has lost its traction and retreated to the 1.2300 area early Wednesday. The near-term technical outlook points to a loss of bullish momentum and the pair could stay in a consolidation phase in the absence of fundamental drivers.
The data published by the Bank of England showed on Wednesday that Consumer Credit declined to £1.413 billion in February from £1.686 billion in January. Although this reading came in higher than the market expectation of £1.3 billion, it failed to help Pound Sterling regain its traction.
In the second half of the day, Pending Home Sales for February, which are forecast to decline by 3% following January's surprising 8.1% increase, will be looked upon for fresh impetus. A larger-than-forecast decline could hurt the USD and vice versa but the market reaction to this low-tier data is likely to remain short-lived.
Meanwhile, US stock index futures trade in positive territory following Wall Street's uninspiring action on Tuesday. A rebound in major US indices could limit the US Dollar's recovery gains and support GBP/USD in the American session. On the other hand, the pair is likely to come under bearish pressure if there is a negative shift in risk mood.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the four-hour chart declined toward 60 and GBP/USD is trading near the lower-limit of the ascending regression channel, pointing to a loss of bullish momentum. Nevertheless, the recent action doesn't suggest that sellers are showing interest either. Hence, the pair could move sideways in the short term.
On the downside, 1.2300 (psychological level, static level, lower limit of the ascending channel) aligns as key support. In case GBP/USD falls below that level and starts using it resistance, 1.2260 (50-period Simple Moving Average (SMA) on the four-hour chart) could be seen as the next support below 1.2230 (static level).
Following Tuesday's action, resistance seems to have formed at 1.2350. Above that level, the mid-point of the ascending channel aligns as next hurdle at 1.2370 before the pair can target 1.2400 (psychological level, static level).
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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.
