GBP/USD finally broke below the 1.2700 mark in the American session, as sentiment shifted to the worse, following dismal US employment and inflation-related data. The poor performance of stocks and an uptick in Treasury yields boost demand for the US Dollar.
In case GBP/USD continues to trade above 1.2750-1.2760 area, where the Fibonacci 50% retracement of the latest downtrend and the 200-period Simple Moving Average (SMA) are located, it could meet the next resistance at 1.2800 (Fibonacci 61.8% retracement) before targeting 1.2850 (static level).
On the downside, immediate support aligns at 1.2730 (50-period SMA) ahead of 1.2700 (Fibonacci 38.2% retracement) and 1.2670 (100-period SMA).
Fundamental Overview
GBP/USD registered small losses on Wednesday but didn't have a difficult time holding its ground. The pair trades modestly higher on the day above 1.2750 on Thursday and the technical outlook suggests that the bullish bias remains intact in the near term.
The US Dollar outperformed its major rivals midweek following the inflation report. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) and the core CPI both increased by 0.3% on a monthly basis, matching market forecasts.
Later in the day, the BLS will publish the Producer Price Index (PPI) data for November and the US Department of Labor will release the weekly Initial Jobless Claims figures. Markets expect the number of first-time applications for unemployment benefits to decline to 220,000 from 224,000. In case this data arrives above 230,000, the USD could come under pressure and help GBP/USD push higher.
Meanwhile, US stock index futures were last seen losing between 0.2% and 0.3%. A bearish opening in Wall Street could cap GBP/USD's upside in the early American session.
Investors will also pay close attention to the European Central Bank's (ECB) policy announcements. A dovish ECB surprise, be it a 50 basis points (bps) rate cut, or a 25 bps cut with a dovish policy statement, could trigger a Euro selloff. In this scenario, Pound Sterling could capture capital outflows out of the Euro and stay resilient against the USD.
Comments