If you’ve read our recent FX Weekly Recaps then you’ll know that GBP has been struggling to get bullish momentum since the U.K. printed sticky labor data and cooler-than-expected inflation reports last week.
Meanwhile, more traders seem to have priced in the reduced prospects of a Fed interest rate cut in the next central bank meeting or two.
Will today’s U.S. and U.K. PMI releases bust GBP/USD out of its current consolidation?
GBP/USD 4-hour Forex Chart by TradingView
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the U.S. dollar and the British pound, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
If you’ve done your fundies homework and you’re biased for the dollar and against the pound, then you’ll want to consider GBP/USD possibly getting rejected at the 1.2650 minor psychological handle.
As you can see, the area has not only served as support in late December and early January, but it’s also not too far from the 4-hour chart’s 100 and 200 SMAs as well as the R1 (1.2680) Pivot Point line.
A rejection at the 1.2650 area followed by a few bearish candlesticks opens the possibility of GBP/USD dropping back to 1.2530 – 1.2550 support zone that marks the pair’s 2024 lows.
But if today’s market themes inspire USD-selling or increase the demand for GBP, then GBP/USD could bust through the SMA and R1 resistance levels.
If we see GBP/USD make new February highs, then a move to the R2 (1.2750) December and January highs may be on the table.
Good luck and good trading this setup!