- GBP/USD holds above 1.2550, struggles to build on Tuesday's gains.
- Sellers could retain control while 1.2590 resistance stays intact.
- US economic calendar will offer ADP Employment Change and ISM Services PMI data.
GBP/USD went into a consolidation phase above 1.2550 after closing modestly higher on Tuesday. The technical outlook is yet to point to a buildup of recovery momentum, while investors await data releases from the US.
The US Dollar (USD) came under modest selling pressure in the American trading hours on Tuesday and allowed GBP/USD to edge higher. Since there were no fundamental developments that may have caused the USD to lose interest, the pullback in the USD Index could be the product of a technical correction.
In the second half of the day, the ADP will release the private sector employment data for March. Investors expect private payrolls to rise 148K following February's 140K increase. A stronger-than-forecast reading could support the USD and weigh on the pair.
Later in the American session, the ISM Services PMI will also be looked upon for fresh impetus. A significant increase in the Prices Paid Index, the inflation component of the PMI survey, could revive concerns over services inflation remaining sticky and cause investors to reassess the probability of a policy pivot in June. According to the CME FedWatch Tool, there is a 37% chance of a 25 basis points rate cut in June.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) on the 4-hour chart stays below 50 and GBP/USD continues to trade within a descending regression channel, reflecting the bearish bias. More importantly, the pair closed below the 200-day Simple Moving Average, currently located at 1.2590.
On the downside, static support seems to have formed at 1.2540 before 1.2500 (psychological level, static level). In case GBP/USD manages to reclaim 1.2590, 1.2620 (upper limit of the descending channel, Fibonacci 23.6% retracement of the latest downtrend) and 1.2670 (Fibonacci 38.2% retracement) could be seen as next resistances.
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