GBP/USD further advances to the 1.40 area amid an extended USD sell-off

The GBP/USD continued rising and reached a high of 1.4006 amid a new wave of US dollar sales.
US stocks are on the rise, leading the risk-rally.

Yohay Elam FXStreet

The sell-off of the US dollar further extends in the US afternoon, sending the GBP/USD to levels last seen last Thursday. The pair is rising in tandem with US stocks. After starting modestly lower, shares have increased in Wall Street. The market mood improved as the VIX volatility index slipped to the lower ground, implying lower risk.

Earlier, the release of the US inflation report triggered a strengthening of the US dollar and a drop of GBP/USD to 1.3800. The Consumer Price Index rose more than expected in January. Core CPI is up 1.8% y/y, and headline inflation is up 2.1%. The quicker rise in prices led investors to price in a higher chance of four rate hikes by the Federal Reserve in 2018.

The inflation report was accompanied by the retail sales release which showed disappointing results, leading to significant downgrades of growth forecasts for the first quarter of 2018.

The next events on the economic calendar are the releases in the US: PPI, the Philadelphia and New York manufacturing indices and jobless claims are the highlights on Thursday.

GBP/USD Technical Outlook

The technical picture is slightly positive for the pair. The RSI on the daily chart is above 50 points, and momentum is modestly positive. The pair touched the 50-day SMA at 1.4006, which serves as resistance.

Further above, the high of February 8th at 1.4060 is the next line of resistance, followed by 1.4280, which capped the pair in early February.

Looking down, 1.3920 capped the pair yesterday and now switches to a support line. The swing-low of 1.38 is the next line to watch.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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