GBP/USD Shows Upside Momentum but Faces Technical Hurdles PCE
GBP/USD has displayed upward momentum in early Friday trading, surpassing the 1.2350 level. However, the technical outlook for the pair has yet to indicate a clear reversal. As the weekend approaches, market participants will closely monitor the release of the US Personal Consumption Expenditures (PCE) Price Index data.
Despite a return of risk appetite on Thursday, the US Dollar (USD) maintained its strength due to robust economic data, supporting the hawkish stance of the Federal Reserve (Fed). The revised annualized growth rate of the US economy for the first quarter was raised from 1.1% to 1.3%, and Initial Jobless Claims for the week ending May 20 came in at 229,000, significantly lower than the market's expectations of 245,000.
As market sentiment shifted, the probability of a 25 basis points Fed rate hike in June, according to the CME Group FedWatch Tool, climbed above 40%, up from nearly 20%.
Later today, the US Bureau of Economic Analysis will publish the PCE Price Index data for April. Federal Reserve Governor Christopher Waller previously emphasized the importance of April's PCE inflation data in determining the next policy move.
The forecast for the monthly core PCE Price Index suggests a 0.3% increase. A stronger-than-expected monthly rise, particularly at or above 0.5%, could boost the US Dollar and prompt GBP/USD to turn bearish before the weekend. Conversely, a softer reading below 0.3% might discourage investors from expecting another near-term Fed rate hike and trigger a downward correction in the US Dollar Index.
From a technical standpoint, we anticipate a continuation of GBP/USD's upward movement until the 61.8% Fibonacci level, where a potential pullback in the downtrend direction may occur. Additionally, there is a divergence on the RSI indicator, and the price may form a double top within the aforementioned area.
Despite a return of risk appetite on Thursday, the US Dollar (USD) maintained its strength due to robust economic data, supporting the hawkish stance of the Federal Reserve (Fed). The revised annualized growth rate of the US economy for the first quarter was raised from 1.1% to 1.3%, and Initial Jobless Claims for the week ending May 20 came in at 229,000, significantly lower than the market's expectations of 245,000.
As market sentiment shifted, the probability of a 25 basis points Fed rate hike in June, according to the CME Group FedWatch Tool, climbed above 40%, up from nearly 20%.
Later today, the US Bureau of Economic Analysis will publish the PCE Price Index data for April. Federal Reserve Governor Christopher Waller previously emphasized the importance of April's PCE inflation data in determining the next policy move.
The forecast for the monthly core PCE Price Index suggests a 0.3% increase. A stronger-than-expected monthly rise, particularly at or above 0.5%, could boost the US Dollar and prompt GBP/USD to turn bearish before the weekend. Conversely, a softer reading below 0.3% might discourage investors from expecting another near-term Fed rate hike and trigger a downward correction in the US Dollar Index.
From a technical standpoint, we anticipate a continuation of GBP/USD's upward movement until the 61.8% Fibonacci level, where a potential pullback in the downtrend direction may occur. Additionally, there is a divergence on the RSI indicator, and the price may form a double top within the aforementioned area.
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