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GBP/USD holds above mid-1.2300s ahead of US PCE Price Index, touching range high

  • GBP/USD pulls back from over a two-month high amid a modest pickup in the USD demand.
  • The better-than-expected UK GDP reaffirms BoE rate hike bets and helps limit the downside.
  • Traders also seem reluctant and prefer to wait for the release of the US Core PCE Price Index.

The GBP/USD pair comes under some selling pressure after touching over a two-month high, around the 1.2420-1.2425 area on Friday and maintains its offered tone through the first half of the European session. The pair is currently placed near the lower end of its daily trading range, around the 1.2370-1.2365 zone, down nearly 0.15% for the day.

A goodish pickup in the US Treasury bond yields helps revive the US Dollar (USD) demand on the last day of the week, which turns out to be a key factor dragging the GBP/USD pair lower. Hopes that a widespread banking crisis might have been averted fueled speculations that the US central bank might move back to its inflation-fighting interest rate hikes. Adding to this, three Fed officials on Thursday backed the case for more rate increases to lower high levels of inflation. This, in turn, acts as a tailwind for the US bond yields and lends some support to the Greenback.

Hence, the market focus will remain glued to the release of the US Core PCE Price Index, the Fed's preferred inflation gauge, due later during the early North American session. Heading into the key data risk, traders seem inclined to lighten their bullish bets around the GBP/USD pair, especially after this week's rally of over 200 pips. That said, the slightly better-than-expected UK GDP print reaffirms expectations for additional rate hikes by the Bank of England (BoE), which, in turn, holds back bearish traders from placing aggressive bets around the major, at least for now.

Apart from this, the prevalent risk-on mood - as depicted by an extension of the recent rally in the equity markets - keeps a lid on any meaningful gains for the safe-haven buck and contributes to limiting the downside for the GBP/USD pair. This makes it prudent to wait for strong follow-through selling before confirming that the upward trajectory witnessed since the first half of the current month has run out of steam and positioning for any meaningful depreciating move. Nevertheless, spot prices remain on track to end in positive territory for the sixth successive week.

From a technical perspective GBP/USD appears to have reached a make-or-break level at around 1.2375 at the upper borderline of a broad sideways range that has unfolded since the start of the year. If the market's ranging mode extends, the pair may pivot at the current level and then begin falling back down towards the range lows in the 1.18s. Currently it is too early to say for sure whether it will reverse and there are no technical indications of a reversal, such as a bearish Japanese candlestick pattern or overbought RSI. If the pair pushes out above the highs of the range the move will need to be strong to suggest an extension higher. The pair has reached an important inflection point on the chart and traders should monitor developments closely over the next few days for a steer on GBP/USD's future course.

Technical levels to watch

GBP/USD

Overview
Today last price1.2374
Today Daily Change-0.0014
Today Daily Change %-0.11
Today daily open1.2388
 
Trends
Daily SMA201.2149
Daily SMA501.215
Daily SMA1001.2125
Daily SMA2001.1895
 
Levels
Previous Daily High1.2393
Previous Daily Low1.2294
Previous Weekly High1.2344
Previous Weekly Low1.2167
Previous Monthly High1.2402
Previous Monthly Low1.1915
Daily Fibonacci 38.2%1.2355
Daily Fibonacci 61.8%1.2332
Daily Pivot Point S11.2324
Daily Pivot Point S21.2259
Daily Pivot Point S31.2225
Daily Pivot Point R11.2423
Daily Pivot Point R21.2458
Daily Pivot Point R31.2522

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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