- GBP/USD trades in a narrow band above 1.2800 on Monday.
- Investors could refrain from betting on further Pound Sterling strength in the short term.
- BoE will announce rate decision on Thursday after May inflation data on Wednesday.
GBP/USD went into a consolidation phase above 1.2800 on Monday after having climbed to its strongest level in 14 months at 1.2850 on Friday. The pair could have a difficult time building on last week's gains in the near term, with investors moving to the sidelines ahead of this week's key macroeconomic events.
The broad-based selling pressure surrounding the US Dollar (USD) fuelled GBP/USD rally last week. The US Dollar Index, which tracks the USD's performance against a basket of six major currencies, stages a modest rebound in the European morning, limiting the pair's upside.
Stock and bond markets in the US will be closed on Monday in observance of the Juneteenth holiday, suggesting that market action is likely to remain subdued in the second half of the day.
Ahead of the Bank of England's (BoE) monetary policy announcements on Thursday, the UK's Office for National Statistics will release May inflation figures on Wednesday. Hence, the USD's valuation could drive GBP/USD's action in the next couple of days.
GBP/USD Technical Analysis
The near-term technical outlook for GBP/USD points to overbought conditions. The Relative Strength Index (RSI) indicator on the four-hour chart stays slightly above 70 and the pair remains outside the ascending regression channel coming from late May.
The 1.2800 level (upper-limit of the ascending channel) aligns as first support. In case GBP/USD drops below this level and starts using it as resistance, it could extend its downward correction toward 1.2750 (20-period Simple Moving Average (SMA), mid-point of the ascending channel) and 1.2700 (lower-limit of the ascending channel).
On the upside, GBP/USD could face stiff resistance at 1.2850/1.2860 (14-month high set on Friday, static level from October 2020) before targeting 1.2900 (psychological level, static level).
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