GBP/USD Extends Corrective Pullback For A Third Consecutive Day Above 1.26300 Mark, Initial Jobless Claims Data Eyed
Key Takeaways:
- GBP/USD pair rose above the 1.26300 mark on Thursday during the Asian session, extending a corrective pullback for a third consecutive day
- Uncertainty about the timing of the Fed rate cuts weighs on Treasury yields, which acts as a headwind to the buck
- A fresh round of positive U.K. macro data extends support for the cable and helps cap the downside for the GBP/USD cross
- The market's attention shifts toward the release of the initial jobless claims data for fresh GBP/USD directional impetus
GBP/USD cross witnessed fresh bids from the vicinity of the 1.26282 level on Thursday during the early Asian session. It rose slightly above the 1.26300 level to mark a third day of positive gains in the last four days and firmly extended the corrective pullback from the vicinity of the 1.25185 level/two-month low touched on Monday.
Uncertainty about the timing of the Fed rate cuts is a key factor weighing heavily on U.S. Treasury bond yields. Along with a weaker risk tone, this drove flows away from the safe-haven greenback toward the cable.
This comes as investors weighed new remarks from a host of Fed speakers who cautioned against aggressive early rate cuts. Fed Governor Adriana Kugler said that while inflation is easing, the "job is not done yet." In contrast, Minneapolis Fed President Neel Kashkari expects only two to three cuts.
The influential FOMC member's comments join last week's and this past weekend's Fed Chair's comments, in which he poured cold water on a March rate cut and reassured markets that the central bank will proceed carefully with interest rate cuts this year and likely will move at a considerably slower pace than the market expects. That said, the generally positive sentiment surrounding the U.S. equity markets, another factor undermining the buck and helping exert upward pressure on the GBP/USD cross, further contributes to the sentiment around the GBP/USD pair.
Additionally, a fresh batch of disappointing macro data released on Wednesday weighs on the economy. A U.S. Bureau of Economic Analysis (BEA) report showed that the goods and services deficit for the U.S. was $62.2 billion in December, up $0.3 billion from $61.9 billion in November revised.
Moreover, a fresh round of positive U.K. macro data extends support to the cable and helps cap the downside for the GBP/USD cross. The Halifax House Price Index rose by 2.5% yoy in January 2024, following an upwardly revised 1.8% in the prior month and pointing to the highest level since January 2023 amid a recent reduction of mortgage rates from lenders, fading cost pressure, and a still-resilient labor market. House prices increased by 1.3% every month, the fourth monthly rise in a row and the steepest gain in the sequence.
As we advance, investors look forward to the U.S. docket, which will feature the release of the previous week's Initial Jobless Claims data report. The data will influence the USD price dynamics, which, along with the broader market risk sentiment, should allow traders to grab some long-term opportunities around GBP/USD.
Technical Outlook: One-Day GBP/USD Price Chart
From a technical standpoint, GBP/USD is currently placed below a key support channel following an extension of the modest bounce from the vicinity of the 1.25185 level. The aforementioned support channel has now turned to a resistance level, which poses a severe hurdle that could limit further gains around the shared currency. However, if the price pierces this barrier, we could see GBP/USD head northwards toward the pivot level at 1.26899. A clean move above this level would reaffirm the bullish bias and pave the way for an ascent toward the next barricade at 1.27847. Bulls need to break above this barrier to confirm an extension of the bullish trajectory towards the 1.28782 ceilings and possibly a retest of the key resistance level plotted by an upward ascending trendline extending from the late-November 2023 swing higher highs.
On the flip side, if dip-sellers and tactical traders jump back in and trigger a bearish reversal, initial support comes in at the 1.25945 level (S1). A decisive move below this level could see the shared currency drop toward the technically strong 200-day (brown) Exponential Moving Average (EMA) at 1.25155. Acceptance below this level would negate the near-term bullish outlook and pave the way for a drop toward the next support level at 1.25013, and if this level fails to hold, the GBP/USD cross could descend further toward the 1.25000 psychological mark.
