GBP/USD Supported at $1.2560 – Can Ascending Channel Drive Uptrend?
Skerdian Meta • 2 min read
GBP/USD rises confidently above 1.2600, reversing the first daily loss in five days during Wednesday’s quiet Asian morning. Having said that, the cable’s daily top was around 1.2610 at the time of publication. The recent increase in GBP/USD could be attributed to the US dollar’s failure to maintain its bounce off a one-month low, despite rising concerns about inflation and the Fed’s prudent role.
Lately, US President Joe Biden praised the US Federal Reserve’s (Fed) work in controlling price increases, followed by US Treasury Secretary Janet Yellen’s admission that she wasn’t right about inflation.
“US Treasury Secretary Janet Yellen said on Tuesday that she was mistaken in the past about the way inflation would take, but that taming price growth is President Joe Biden’s top priority, and he supports the Federal Reserve’s actions to achieve that,” Reuters reported.
Despite a pullback from 102.17, the US Dollar Index (DXY) posted its first daily positive in four days by Tuesday trading. The US dollar index recovered the previous day as traders cheered hawkish comments from Fed Board of Governors member Christopher Waller and positive domestic data.
According to Reuters, Fed’s Waller stated that he supports raising interest rates by another 50 basis points at the next several Federal Reserve meetings. The policy rate should be above neutral by the end of the year to reduce demand. The US Chicago Purchasing Managers’ Index and CB Consumer Confidence, on the other hand, both rose above forecasts for May, while the Dallas Fed Manufacturing Business Index fell to its lowest level in two years.
At home, agitations over UK Prime Minister Boris Johnson’s party during the Covid-led lockdowns combine with British business leaders’ disappointment over the Northern Ireland Protocol (NIP) to weigh on GBP/USD prices. Concerns have been raised about the Bank of England’s (BOE) role in containing inflation. According to The Times, “in a pessimistic estimate of the UK’s economic prospects, the influence of Brexit, and the potential ‘politicization’ of monetary policy, the US investment bank (Bank of America) thinks that investors will abandon the pound after sustained weakness.”
The US ISM Manufacturing PMI for May is expected to be 54.5 versus 55.4 previously, while Fedspeak and other risk catalysts may entertain GBP/USD traders. The market’s focus will stay on the US non-farm payroll due on Friday.
GBP/USD Technical Outlook
The GBPUSD pair maintains its stability above the 1.2590 level and begins to offer positive trades now in an attempt to restart the bullish wave. The uptrend is dependent on price stability above the 1.2590 level, noting that our anticipated targets begin at 1.2725 and extend to 1.2860 after surpassing the previous level.
Today’s trading range is expected to be between 1.2560 support and 1.2710 resistance. Investors will be keeping their eyes on the US CB Consumer Confidence to determine further trends today. Good luck!