**GBP/USD Weekly Outlook:**
*Original Analysis Credit: ActionForex.com Staff*
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**Current Market Overview**
Last week, GBP/USD experienced continued volatility but showed resilience against a generally stronger US dollar. The pair fluctuated between strong resistance and support levels, reflecting ongoing shifts in both fundamental and technical factors. Investors interpreted mixed economic data from the UK and the US, keeping Cable (GBP/USD) within a defined trading range as the markets sought further direction ahead of upcoming major event risks.
**Key Technical Developments**
The pair opened the week on a neutral note, testing significant levels without breaking out. Price action was characterized by:
– Oscillation around the 1.2700 handle, which has become a critical psychological and technical reference point.
– Repeated challenges to the upside resisted by supply near the 1.2850 region.
– Support reliably forming in the 1.2580 area, with only brief intraday dips below.
Technical indicators have provided the following insights:
– Daily Moving Averages: The pair remains above the 100-day simple moving average, a sign of underlying medium-term strength.
– RSI (Relative Strength Index): Neither overbought nor oversold, the RSI on daily charts hovered around the midline, pointing to balanced momentum.
– MACD (Moving Average Convergence Divergence): The MACD histogram indicated reduced bullish momentum, but the absence of strong negative signals suggested persistence in the prevailing range.
**Weekly Performance:**
– High: 1.2845
– Low: 1.2590
**Fundamental Drivers**
**United Kingdom:**
– Economic data has been uneven, with inflation showing moderation but services prices remaining elevated. This has prompted speculation about the Bank of England’s (BoE) trajectory regarding rates.
– The BoE’s May policy meeting reinforced a cautious tone, with policymakers emphasizing a data-dependent approach. This has limited immediate moves in GBP/USD, as markets await confirmation of the Bank’s next steps.
– Wage growth and employment data continued to show persistence, complicating the prospects for near-term rate cuts.
– Political uncertainty remains a factor as the UK approaches a General Election, although currency volatility linked to these concerns has been modest so far.
**United States:**
– US economic data last week was mixed, with robust non-farm payroll numbers contrasting with softer Purchasing Managers’ Index (PMI) readings.
– The Federal Reserve, in its post-FOMC commentary, reiterated its wait-and-see approach on inflation. Rate cut expectations have ebbed and flowed, directly impacting US yields and the dollar’s overall tone.
– US CPI inflation data is now the primary focus, expected to provide the next directional impulse for GBP/USD.
**Major Event Risks Ahead**
Several notable events could trigger renewed volatility:
– UK employment and Average Earnings data
– US CPI (Consumer Price Index) inflation release
– US Retail Sales figures
These releases could provide clarity regarding the divergence (or convergence) of monetary policy between the BoE and the Fed.
**Technical Outlook and Scenarios**
**Primary Range:**
– **Support Zone:** 1.2580 to 1.2620
– **Resistance Zone:** 1.2800 to 1.2850
– The 55-day EMA (approx. 1.2670) has acted as a magnetic pivot, repeatedly attracting price.
**Potential Bullish Bias:**
Should GBP/USD decisively break above the 1.2850 resistance area, follow-through momentum could open:
– Immediate target at 1.2900 (psychological round level)
– Next key resistance sitting near 1.3000, a historically significant barrier now coinciding with longer-term trendline resistance
Such a move would require either a dovish shift from the Fed or unexpectedly hawkish data from the UK, which could prompt speculation about a delayed BoE easing cycle.
**Possible Bearish Pressure:**
A clear move below 1.2580 could signal
Read more on GBP/USD trading.