The upward march of the GBP/USD currency pair culminated in testing the psychological resistance 1.3000, the highest for the currency pair in more than 15 months. There is a possibility of moving towards that peak if the currency pair breached the resistance level 1.2850. The decline in US inflation levels helped compliment the divergence of recent US job numbers by reducing the path of raising US interest rates by the US Federal Reserve.
The price of the GBP/USD is settling around the resistance level 1.2990 at the time of writing, ahead of a package of important and influential US and British economic data. Alongside the US data, the pound is extending the momentum of the post jobs report, but analysts say the US dollar side of the equation will be where the action lies over the coming sessions.
On a technical note, the GBP/USD daily chart is pointing to overbought levels, with the Relative Strength Index (RSI) now above 70. The RSI is a momentum indicator and when it is above 50 it serves as a confirmation that the exchange rate is undergoing positive momentum. But when it moves above 70 it indicates overbought conditions.
The RSI eventually tends to return to the 30-70 range on any breaches outside of these limits, but for this to happen, the GBPUSD exchange rate needs to either enter a neutral phase or decline. And although the trend remains positive, some calm in the rally is a possible development in the coming days.
After the release of US labor market data that hinted that the Bank of England would not be required to push interest rates higher than 6.0%. Sterling helped to make further gains and the Office for National Statistics reported that wage pressures remained sharp and are likely to spur inflation further, but all other signs in the labor market survey point to a calm job market and suggest that wage pressures will ease over the coming months. Indeed, the UK's unemployment rate unexpectedly rose to 4.0% and job vacancies fell for the 12th consecutive month, suggesting that it won't be long before wage pressures drop enough to start putting pressure on core inflation.
The GBP's move higher after the labor market report would suggest that the market is ready to welcome a decline in BoE's interest rate forecast from levels above 6.0% as it reduces the risk of a deep interest rate-induced recession.
Forecast for the pound sterling against the US dollar today:
- According to the performance on the daily chart below, the rise of the GBP/USD currency pair against the US dollar around and above the psychological resistance confirms the bulls’ stronger control over the trend.
- At the same time it pushes the technical indicators towards overbought levels.
- In the event that the weaker British economic growth figures and the rest of the US inflation readings come in addition to the stronger weekly jobless claims, the currency pair may be exposed to profit-taking sales.
- The first stops for the currency pair's decline are the support levels at 1.2850 and 1.2760, respectively.
If the stronger British economic figures come and the US economic figures continue to be weaker, the bulls may find the opportunity to move more upwards, and the next peaks will be 1.3085 and 1.3130, respectively.
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