The GBP/USD pair maintains its daily gains close to 1.2450 after initially stabilizing near 1.2500 in response to the UK’s unexpectedly high inflation report. The pair continues to hold thanks in part to the continuing weakening of the US Dollar.
GBP/USD Technical Overview
For the first time in a week, the GBP/USD pair crossed above the 4-hour chart’s 20-period Simple Moving Average (SMA), and the Relative Strength Index moved closer to 50, indicating a build-up of recovery momentum.
On the plus side, immediate resistance is aligned with psychological level 1.2500 (previous support). The GBP/USD pair could continue to rise toward the static level of 1.2560 and the upper limit of the descending channel, 1.2580, if they are able to turn that level into support.
The first point of support is situated ahead of 1.2380 (the lower limit of the declining channel) at 1.2400 (the psychological level, static level).
Fundamental Overview
During Wednesday’s early European session, the GBP/USD pair gained momentum and moved above 1.2450. The technical picture for the immediate future indicates that momentum for a rebound is building, although the pair may encounter strong resistance at 1.2500.
According to a study released on Wednesday by the Office for National Statistics (ONS) in the United Kingdom, the Consumer Price Index (CPI) showed a decrease in inflation from 3.4% in February to 3.2% in March. This reading above the 3.1% market expectation. In addition, the volatile food and energy prices are subtracted from the core CPI, which increased 4.2% during the same time vs the 4.1% increase predicted by analysts. In response to these readings, Pound Sterling gained momentum over its competitors.
As the market atmosphere improves in the middle of the week, the US dollar finds it difficult to find demand, which helps GBP/USD move higher. The US market index futures are up between 0.2% and 0.4%, while the UK’s FTSE 100 Index is up more than 0.5% on the day.
If the US doesn’t provide any high-quality data, the GBP/USD exchange rate might retain its ground if risk flows continue to drive financial market activity.
Investors will also be closely monitoring any developments pertaining to the crisis between Israel and Iran. To decide how to react to Iran’s retaliation attack over the weekend, Israel’s cabinet is expected to meet. The USD may regain its strength and restrict the upside potential of the GBP/USD exchange rate if geopolitical tensions in the Middle East worsen.