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GBPUSD Analysis As the Dollar Shows More Cracks

The British pound is en route to register its sixth consecutive day of wins against the US dollar in an early European session. The cable is trading at 1.2693 as of this writing, up 0.05%, as reduced yields by US Treasuries weighed down on the dollar. In addition, the pair is currently being propelled up by lower-than-expected US New Home Sales data.

The US Census Bureau reported a rise in the number of building permits issued over the past two weeks. However, there was a significant decline in the number of New Home Sales in January and this triggered a bearish sentiment towards the dollar. The reading came in at 661,000, beating December’s 651,000, but falling below the consensus forecast figure of 680,000. The property market is a key component of the US economy, and is infamously associated with the 2008 financial crisis.

Therefore, the market’s sensitivity towards the decline in sales figures is expected to weigh in on the dollar, possibly beyond the two macroeconomic releases scheduled for Tuesday. The January Core Durable Goods Orders and Consumer Confidence readings will be out on Wednesday and could ease the pressure on the dollar if both of them exceed expectations. However, a decline in either reading could exacerbate the dollar’s troubles, as traders will likely consider them in the context of the disappointing home sales data.

Furthermore, it doesn’t help the dollar that yields on 5-year and 10-year US treasuries have fallen by 3 basis points as of this writing. BoE Deputy Governor Dave Ramsden is scheduled to speak during the London Session, and this could provide a new angle to the GBPUSD trading strategy. Coming on the heels of Governor Andrew Bailey’s recent testimony in the UK parliament, his comments could provide more hints on the UK monetary policy direction.

However, the biggest impact for GBPUSD will come from Wednesday’s release of US GDP figure for the last quarter of 2023. The reading is forecast to show a growth of 3.3%, and swings on either side will define the currency pair’s trajectory.

Technical analysis

GBPUSD has established a pivot at 1.2665, and the momentum currently favours the bulls. If the current momentum continues, the pair will likely encounter the first resistance at 1.2690. A breach of that point could see the next resistance come at 1.2700. Alternatively, the bulls could give up control if GBPUSD goes under 1.2665. At that point, support will be at 1.2655. A breach below that point will invalidate the bullish view and push the next target to 1.2645.