GBP/USD: Will the post-Fed recovery sustain ahead of UK services PMI?

Dhwani Mehta FXStreet

Having found fresh bids once again near 1.2860 region in Asia opening trades, the GBP/USD pair kept its steady recovery mode intact, with the bulls regaining the bids heading into the all-important UK services PMI report due on the cards later today.

Currently, the spot remains in the lower bound of this week’s 100-pips trading range, in response to a solid comeback staged by the US dollar across the board, following the overnight FOMC outcome.

The shorter-duration treasury yields rocketed, as June Fed rate hike bets swelled after the Fed noted that the Q1 GDP weakness was transitory, while adding that inflation is running close to 2% goal. The Fed also acknowledged the continued improved in the labor market.

Moreover, the spot remained under pressure and failed to hold the 1.29 handle a day before, as renewed concerns over the Brexit deal weighed on the GBP. EU’s Chief Brexit negotiator Barnier delivered the EU-Brexit directives yesterday, noting that Brexit will have legal and human consequences.

In the day ahead, it remains to be seen if the major can extend the recovery beyond 1.29 handle, should the UK services PMI data deliver a positive surprise, especially after the UK manufacturing and construction PMI reading surprised markets to the upside. Also, the US jobless claims, trade balance and factory orders data will be eyed for further momentum.

GBP/USD Levels to consider

A break above 1.2900 (5-DMA/ round number) could lift the pair above 1.2955 (May 1 high), beyond which a test of 1.2970 (7-month tops) is imminent. Conversely, a break below 1.2862/61 (daily & previous lows), leading to a subsequent break below 1.2835/34 (classic S1/ Apr 27 low) is likely to drag the pair towards testing its next support near 1.2800 (key support).

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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