The GBP/USD pair remains trapped in a narrow trading range in the Asian session on Friday. Traders are eagerly waiting for the release of the US PCE Price Index before placing any fresh directional bets. The lack of a breakthrough in a descending trend-line is hampering the prospects for additional gains.
The GBP/USD pair is struggling to gain any significant momentum and is oscillating within a tight trading band, just above the 1.2700 mark in the Asian session. Although spot prices are within striking distance of a two-week high reached on Wednesday, market participants are cautious and looking for a fresh impetus from the US PCE Price Index.
The US PCE Price Index is crucial for the market as it plays a key role in shaping expectations about the Federal Reserve’s timing for cutting interest rates. The data will provide insights into the level of inflationary pressures and impact the value of the US Dollar. Strong economic growth figures and signs of easing inflationary pressures may lead to a soft landing, prompting a decline in US Treasury bond yields and supporting the GBP/USD pair.
The strong start to the year by the UK economy gives the Bank of England (BoE) a reason to maintain interest rates at their highest level in nearly 16 years during its upcoming meeting. This positive outlook for the British Pound (GBP) may further contribute to a near-term appreciation of GBP/USD.
However, the diminishing odds of an early interest rate cut by the Federal Reserve could hinder aggressive USD bearish bets by traders. This might limit the potential gains for the GBP/USD pair ahead of the Federal Open Market Committee (FOMC) meeting next week.
Technical Analysis
From a technical perspective, the GBP/USD pair has been struggling to break through a downward sloping trend-line that has been in place since the December swing high. The immediate resistance lies near the 1.2740 region, and a decisive breakthrough could open the doors for further gains. A sustained move beyond this level might lead to a rally towards the 1.2800 round figure and potentially reach the 1.2825-1.2830 zone, which was last seen in August 2023.
On the downside, immediate support can be expected near the 1.2680 region, followed by the 1.2655-1.2650 area. If these support levels are breached, the GBP/USD pair could slide back towards the sub-1.2600 levels or even test the monthly trough.
As traders eagerly await the US PCE Price Index release, the GBP/USD pair continues to struggle for meaningful traction. While the UK economy’s strong performance supports the British Pound, the outcome of the US inflation data and the Fed’s interest rate decisions will heavily influence the future direction of GBP/USD. Technical analysis suggests that a breakthrough in the downward sloping trend-line could pave the way for further gains, while a failure to do so might result in a retreat towards lower levels.
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