The GBP/USD pair is currently experiencing a slight pullback after a five-day rally that saw the pair hit a new multi-week high of 1.2700. Bulls are facing resistance at the 1.2700 zone, which is being provided by the top of the daily Ichimoku cloud and the highs of April 9-10. Additionally, the daily chart is showing overbought conditions, prompting traders to take partial profits from the recent rally. This rally was accelerated by data on US inflation, which led to the pair advancing 0.8% in the biggest one-day gain since April 29.
Despite the pullback, GBP/USD is still in a bullish trend, with buyers potentially continuing to push the pair higher. The pair touched its strongest level since April 10 at 1.2700 during Asian trading hours on Thursday before retreating slightly in the European session. Buyers may remain interested in the pair if US data disappoints, leading to further weakness in the US Dollar. The recently released US Consumer Price Index (CPI) data showed a 3.4% increase on a yearly basis in April, in line with analysts’ estimates. The annual core CPI also increased by 3.6% in the same period. This data led to a decline in US Treasury bond yields and a sell-off in the USD as investors priced in a potential Federal Reserve rate cut in September.
Looking ahead, GBP/USD could continue to be influenced by US economic data, as well as any developments in the ongoing trade tensions between the US and China. Traders will be closely watching for any signs of a potential Fed rate cut, which could further weaken the USD and support the GBP. Technical analysis shows that the pair could find support at the 1.2650 level, with further resistance at 1.2700. A break above this level could open the door for a retest of the 1.2750 level.
Overall, the outlook for GBP/USD remains bullish, with buyers potentially retaining control in the near term. However, traders should remain cautious of any potential pullbacks as the pair remains sensitive to shifts in market sentiment and economic data releases. The recent rally in the pair has been driven by a combination of factors, including US inflation data and the ongoing trade tensions between the US and China. It will be important to monitor these developments closely to gauge the future direction of the pair.
