GBPUSD has declined below 1.2400 after reaching its highest level since late January at 1.2423 during the Asian session on Friday. The pair is closing in on a key support level at 1.2350. Market participants will be closely watching. The Personal Consumption Expenditures (PCE) Price Index data from the United States. It’s also worth noting that market volatility is likely to increase later in the day as month and quarter-end flows take their toll.
Earlier in the day, data from the UK’s Office for National Statistics revealed that the UK GDP expanded at an annualized rate of 0.6% in the fourth quarter. This reading improved on the 0.4% growth recorded in the third quarter. Than the 0.4% expected by the market. Nonetheless, the Pound Sterling was unable to capitalize on the positive UK GDP data.
US PCE inflation data and month-end flows could increase market volatility.
Meanwhile, the FTSE 100 Index in the United Kingdom opened flat after closing the first four trading days of the week in positive territory. Furthermore, US stock index futures are virtually unchanged on the day, indicating a cautious market stance.
The Fed’s preferred inflation gauge, Core PCE inflation, is expected to remain unchanged in February at 4.7% year on year. The Core PCE Price Index is expected to rise 0.4% in February. Following a 0.6% increase in January.
The CME Group Fed Watch Tool currently indicates that markets are still undecided about the US Federal Reserve’s next rate decision. A better-than-expected performance Monthly Core PCE inflation of 0.6% or higher may rekindle hawkish Fed bets. Causing the GBPUSD to extend its daily correction, and vice versa.
GBPUSD Technical Analysis
At 1.2350, the lower limit of the ascending regression channel forms critical support. This level is also supported by the four-hour chart’s 20-period Simple Moving Average (SMA).
If GBPUSD breaks through that level and begins to use it as resistance. It may continue to fall towards 1.2300 (50-period SMA, psychological level) and 1.2230. (Static level).
Buyers may remain interested if 1.2350 holds. Resistances in that scenario are at 1.2400 , 1.2420 (the multi-month high set on Friday), and 1.2450. (December 22 high).
