– GBP/USD has gone into a consolidation phase above 1.2500.
– The pair has confirmed 1.2550 as strong resistance.
– A four-hour close below 1.2500 could discourage buyers.
GBP/USD has gone into a consolidation phase above 1.2500 early Friday after having closed the previous three days in positive territory. As 1.2550 stays intact as resistance, the pair could stage a downward correction but the impact of the US data releases on the US Dollar’s (USD) valuation should drive the action ahead of the weekend.
The USD came under renewed selling pressure on Thursday after the data revealed that the Producer Price Index (PPI) declined to 2.7% on a yearly basis in March from 4.9% in February. Monthly Core PPI declined by 0.1%, reviving hopes of softer consumer inflation in the second half of the year.
Additionally, the US Department of Labor said that the weekly Initial Jobless Claims rose by 239,000 from 228,000, pointing to loosening conditions in the labor markets and putting extra weight on the USD’s shoulders.
In the second half of the day, the US Census Bureau will release the Retail Sales data for March, which is expected to arrive at -0.4%. Although this data does not usually trigger a noticeable market reaction, investors will be paying close attention to it, especially after NY Fed President John Williams said that they were looking at the sales figures. A disappointing print should force the USD to stay on the back foot ahead of the weekend and vice versa.
Meanwhile, US stock index futures traded modestly lower early Friday. In case Wall Street’s main indexes reverse direction and decline following Wednesday’s rally, the USD could hold its ground in the American session.
GBP/USD Technical Analysis
GBP/USD faced resistance at 1.2550, where the mid-point after ascending regression channel is located. On the downside, 1.2500 (lower limit of the channel, psychological level) aligns as key support. A four-hour close below that level could open the door for an extended slide toward 1.2475 (20-period Simple Moving Average (SMA)) and 1.2450 (50-period SMA).
On the upside, the pair could target 1.2600 (psychological level, static level) and 1.2640 (upper limit of the ascending channel) once it clears 1.2550 and confirms that level as support.