- GBP/USD has been moving in a narrow channel at around 1.2400.
- Wall Street's main indexes remain on track to open in negative territory.
- Market action could remain choppy ahead of highly-anticipated central bank meetings.
Following the indecisive action witnessed in the second half of the previous week, GBP/USD has started the new week in a quiet manner and has extended its sideways grind at around 1.2400. The cautious market mood could help the US Dollar hold its ground against its rivals later in the day, especially if Wall Street's main indexes come under heavy bearish pressure.
Although the data published by the US Bureau of Economic Analysis revealed on Friday that the Personal Consumption Expenditures (PCE) Price Index declined to 5% in December from 5.5% in November, the US Dollar kept its footing heading into the weekend.
Early Monday, the benchmark 10-year US Treasury bond yield is up nearly 1% on the day at above 3.5%, making it difficult for GBP/USD to gain traction.
Ahead of the US Federal Reserve's (Fed) and the Bank of England's (BoE) policy announcements later in the week, however, investors could refrain from taking large positions in GBP/USD.
In the absence of high-impact macroeconomic data releases from the US, market participants will pay close attention to market sentiment in the American session. As of writing, US stock index futures were down between 0.6% and 1.3% on the day. In case safe-haven flows dominate the financial markets, the US Dollar could gather strength and force GBP/USD to stretch lower.
GBP/USD Technical Analysis
GBP/USD's near-term technical outlook fails to provide a directional clue. The Relative Strength Index indicator on the four-hour chart holds slightly above 50 but the pair struggles to return within the ascending regression channel coming from early January.
1.2400 (lower limit of the regression channel) aligns as first resistance. Once GBP/USD rises above that level and starts using it as support, it could target 1.2450 (static level, mid-point of the channel) and 1.2500 (psychological level, static level).
On the downside, first support is located at 1.2375 (50-period Simple Moving Average (SMA)) before 1.2350 (static level) and 1.2300 (static level, psychological level).
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