GBP/USD alternates gains with losses in the low-1.2600s in response to the lack of a clear direction in the global markets and a lacklustre price action surrounding the Greenback.
The Relative Strength Index (RSI) indicator on the 4-hour chart retreats toward 50, reflecting a loss of bullish momentum. Additionally, GBP/USD failed to make a daily close above the 100-day Simple Moving Average (SMA), currently located at 1.2655, despite rising above this level for three consecutive trading days.
On the downside, first support could be seen at 1.2600 (round level, static level) ahead of 1.2530 (Fibonacci 61.8% retracement of the latest downtrend) and 1.2500 (round level, static level). In case GBP/USD rises above 1.2650-1.2655 (Fibonacci 78.6% retracement, 100-day SMA) and confirms that area as support, it could face next resistance levels at 1.2700-1.2710 (round level, static level) and 1.2750 (static level).
The risk-positive market atmosphere in the early Asian session caused the US Dollar (USD) to come under selling pressure and helped GBP/USD gain traction. Although the market mood remains upbeat, with US stock index futures gaining between 0.5% and 0.7%, GBP/USD finds it difficult to preserve its bullish momentum.
In the second half of the day, the Federal Reserve Bank of Chicago's National Activity Index will be the only data featured in the US economic docket, which is unlikely to trigger a noticeable market reaction. Meanwhile, investors will pay close attention to comments from Bank of England (BoE) Deputy Governor Dave Ramsden and BoE policymaker Swati Dhingra.
In case BoE officials adopt a cautious tone about the inflation outlook, the initial reaction could help Pound Sterling hold its ground. On the flip side, GBP/USD could push lower if policymakers voice their willingness to continue to ease the policy despite the stronger-than-forecast UK inflation readings for January.
On Tuesday, regional manufacturing surveys from the US and the Conference Board's Consumer Confidence Index data from the US will be looked upon for fresh impetus.
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