GBP/USD has been retreating from the highs amid a worsening market mood. Is the downside correction over? Not so fast, as GBP/USD has yet to make a convincing pullback that would allow for further gains. As FXStreet’s Analyst Yohay Elam notes, sterling is hobbled by overbought conditions – US inflation data is critical to the dollar's next moves.
See: GBP/USD to advance nicely towards 2018 highs near the 1.44 mark – Credit Suisse
Cable is still near overbought conditions
“America publishes Consumer Price Index data for April later in the day, and core prices are set to top the 2% level. The calendar is pointing to a jump from 1.6% to 2.3% YoY. The greenback's recovery and the damp mood in markets are showing that unless Core CPI leaps considerably beyond estimates, the dollar could snap back in a ‘buy the rumor, sell the fact’ response.”
“Sterling has been benefiting from better than expected Gross Domestic Product figures for the first quarter in the UK. The economy shrank by only 1.5% during the first months of the year, which were dominated by the nationwide lockdown. Britain's successful vaccination campaign also supports the pound.”
“GBP/USD continues benefiting from upside momentum on the four-hour chart and trades far above the 50, 100 and 200 Simple Moving Averages. However, the Relative Strength Index (RSI) is too close to 70 – flirting with overbought conditions. That makes every upside move limited in nature.”
“Resistance awaits at 1.4160, which is the fresh May high. Further above, 1.42 and 1.4240 are eyed. Support is at 1.4110, the daily low, and then 1.4075 and 1.4050.”
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