GBP/USD outlook: Bulls loosen grip ahead of key US data

GBP/USD

Cable eases from new three-month high in European trading on Thursday, as daily Doji candle on Wednesday signaled indecision and overbought daily studies prompted a partial profit-taking.

Failure to register a daily close above 1.2719 Fibo barrier (61.8% of 1.3141/1.2037) and subsequent weakness add to initial signals of bull trap and increases risk of pullback.

Initial support lays at 1.2655 (5DMA), followed by rising 10DMA (1.2581) which should ideally contain dips to keep larger bulls intact, with deeper correction to expose pivotal supports at 1.2466/58 (converging 200 and 20DMA’s / broken Fibo 38.2%).

Markets await release of key economic indicator today – US PCE price index – Fed’s preferred inflation gauge, which is expected to provide fresh direction signals.

Core PCE is forecasted to rise 3.5% y/y and 0.2% m/m in October, down from September’s 3.7% y/y and 0.3% m/m, with dollar expected to remain under pressure on results in line with expectations but may accelerate lower if inflation in October falls more than expected.

In such scenario, Cable may rally through1.2700/19 pivots for test of 1.2800/18 (Aug 10/22 tops) and 1.2881 (Fibo 76.4% of 1.3141/1.2037) in extension.

Res: 1.2719; 1.2733; 1.2800; 1.2818.
Sup: 1.2655; 1.2581; 1.2500; 1.2485.

Interested in GBP/USD technicals? Check out the key levels