**GBP/USD Surges Above 1.3500 as US Dollar Weakens Ahead of ISM Services PMI**
*Adapted from original reporting by Eren Sengezer, FXStreet*
GBP/USD extended its rally and climbed above the critical 1.3500 mark during the early European session on Thursday, buoyed by broad-based weakness in the US Dollar. This key move, coming ahead of the release of the highly anticipated ISM Services PMI from the United States, signals renewed bullish momentum for the British Pound as market participants adjust positions in response to shifting expectations around US economic data and monetary policy.
**Overview of GBP/USD Performance**
The GBP/USD pair has been locked in a tug-of-war for several weeks, trading within a relatively tight range as investors digested a stream of economic data and central bank commentary from both the UK and the US. However, with the US Dollar reversing recent advances amid softer economic indicators and dovish undertones in Federal Reserve communication, the Pound took advantage and surged.
– GBP/USD broke decisively above the 1.3500 psychological barrier, trading at multi-week highs.
– The move was initiated during Asian trading hours and accelerated in the European session.
– This gain erases losses observed earlier in the week and positions GBP/USD near its 2024 highs.
**US Dollar Weakness: Fundamental Drivers**
The retreat in the US Dollar is at the core of GBP/USD’s advance. Multiple factors have contributed to Dollar weakness:
– **Dovish Federal Reserve Signals:**
Recent commentary from Federal Reserve officials has suggested the central bank remains cautious about further rate hikes. Concerns about economic growth and persistent weaknesses in specific sectors have led some policymakers to adopt a dovish tone, signaling that the terminal rate for this tightening cycle could be near or even already reached.
– **Mixed US Economic Data:**
Various macroeconomic releases have painted a mixed picture of the US economy. While labor market metrics remain resilient, other figures, such as consumer spending, manufacturing output, and Non-Farm Payrolls, have indicated potential softening in economic activity.
– **ISM Services PMI Anticipation:**
Market focus is on the upcoming ISM Services PMI – a crucial gauge of US economic activity in the service sector. Recent readings from other leading indicators have sparked concerns about the pace of growth, with investors bracing for either confirmation or refutation of a slowdown. The anticipation around this report has led traders to pare back Dollar long positions ahead of the event.
**Technical Outlook for GBP/USD**
The technical landscape for GBP/USD has shifted in favor of the bulls following the upside breakout.
– The pair rallied above key resistance near 1.3500, which had capped gains over the previous sessions.
– Momentum indicators such as the Relative Strength Index (RSI) have turned north but remain below overbought territory, suggesting additional room for further advances before correction risks emerge.
– Moving averages (50-day and 200-day) are aligned bullishly, with price action respecting the upward sloping trendline originating from March lows.
**Key Technical Levels**
– **Support:**
– 1.3480/1.3500: Immediate support, previous resistance now turned base for the bulls.
– 1.3450: Secondary support, coinciding with the 50-period moving average on the 4-hour chart.
– **Resistance:**
– 1.3560: Minor resistance, close to intraday highs, a level which sellers may target for profit-taking.
– 1.3620: Major resistance, representing a year-to-date peak from earlier sessions.
A daily close above 1.3500 will reaffirm bullish momentum and could pave the way for a sustained move toward 1.3620 and higher. However, failure to hold this level may prompt consolidation or a modest correction.
**Market Sentiment and Positioning**
Investor sentiment in the GBP/USD pair has shifted to reflect a
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