- GBP/USD remains stuck in a narrow range above 1.2600 to start the week.
- US and UK will release inflation data for January this week.
- Key resistance for the pair is located at 1.2670.
Despite the sharp decline see on Monday, GBP/USD closed the previous week virtually unchanged above 1.2600. The pair struggles to find direction at the beginning of the new week as investors gear up for key inflation reading from the US and the UK.
The risk-positive market environment made it difficult for the US Dollar (USD) gather strength on Friday and allowed GBP/USD to end the day marginally higher. The S&P 500 hit a new record high after the US Bureau of Labor Statistics (BLS) reported that it revised the monthly Consumer Price Index (CPI) increase for December lower to 0.2% from 0.3%.
The US economic docket will not offer any high-impact data releases on Monday. During the American trading hours, Bank of England (BoE) Governor Andrew Bailey will give a lecture at the Loughborough University. He is, however, unlikely to comment on the near-term policy outlook.
The UK's Office for National Statistics (ONS) will publish labor market data on Tuesday ahead of the US inflation report. On Wednesday, the ONS will release CPI and PPI figures. Market participants could refrain from taking large positions on Monday and make it difficult for GBP/USD to find direction.
GBP/USD Technical Analysis
GBP/USD trades within a touching distance of 1.2650, where the Fibonacci 23.6% retracement of the latest uptrend is located. Even if the pair rises above that level, however, it could struggle to clear the 200-day SMA at 1.2670 unless there is a fundamental driver that fuels the action. Above 1.2670, 1.2700 (200-period SMA on the 4-hour chart, psychological level) could be seen as the next hurdle.
On the downside, 1.2600 (psychological level, static level) aligns as interim support before 1.2540 (Fibonacci 38.2% retracement) and 1.2520 (static level).
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