GBP/USD consolidates gains above 1.29 as volume thins out
After dropping to a daily low at 1.2868 following the U.K. data during the European session, the GBP/USD pair erased its losses and rose above the 1.29 handle amid an unabated USD sell-off. After advancing to 1.2930 in the session, the pair started to consolidate its gains and is now trading at 1.2920, up 0.2% on the day.
Despite today's fluctuations, the pair remains in its one-month-old trading range, which is a little wider than 200-pips. Investors are hesitant to add to their long GBP positions as the uncertainty surrounding the Brexit negotiations continue to hurt the overall demand for the cable, while the cautious tone of the BoE signals that the bank is likely to keep its monetary policy unchanged despite the rising inflation.
- Carney's optimism on UK wage growth challenged by new report - BBG
- No changes in the BoE for the next 12-months – Danske Bank
On the other hand, macro data from the United States continue to suggest that the economy struggles to sustain its momentum, hurting the expectations of two more rate hikes in 2017, and forcing the US Dollar Index to give back all of its Trump-led gains. As of writing, the index was at 98.05, losing 0.78% on the day.
- US Dollar slips below 98, touches lowest level since early November
Technical outlook
The pair could extend its losses towards 1.2845 (May 12 low) and 1.2770 (Apr. 24 low) if it makes a decisive break below 1.29 (psychological level). On the upside, resistances could be encountered at 1.2950 (daily high), 1.3000 (psychological level) and 1.3060 (Sept. 28 high).