GBPUSD inched up by 0.03% in the Wednesday Asian session to trade at 1.2681, taking another stab at the elusive 1.2700. The cable has been trading in a tight range between 1.2539 and 1.2683 since March 22 and was rejected at 1.2700 on Tuesday. While the US dollar remains strong, it seems to be running out of steam to sustain a steady upward push against major currencies. This is reflected in the DXY, which has been stuck between 103.91 and 104.69 for the past four trading sessions.
The dollar’s strength is attributed to strong US economic data, which has defied inflationary pressures which have stubbornly above the Fed’s target 2%. Therefore, Wednesday’s release of US Consumer Price Index (CPI) will provide perspective on the Fed’s probable monetary policy direction. Headline inflation (excluding food and energy) is expected to have declined by 0.1% in March to 0.3%. The same is expected to be the reading of the overall inflation month-on-month.
FOMC member Michelle Bowman will speak minutes after the CPI release, and investors will look for hints from her speech. There has been a decline in the level of confidence regarding a June rate cut in the wake of successive upbeat US economic data. However, later on Wednesday, Fed minutes from the March meeting will give deeper insights into what could inform the monetary policy direction.
Meanwhile, there won’t be much action around U.K. economic data on Wednesday. However, the Royal Institution of Chartered Surveyors (RICS) House Price Balance could inject some volatility into the GBPUSD pair.
Technical analysis
The momentum on GBPUSD favours control by the buyers. However, they will need to keep the pair above the 1.2677 pivot level to sustain the upward push. That will see them encounter the first resistance at 1.2691, but sustained control by the sellers could break the resistance and set the pace to test 1.2705. Alternatively, a move below 1.2677 will favour the sellers, with support coming at 1.2663. A continuation of control by the sellers could break the support and test 1.2652 in extension.
