GBPUSD has been moving back and forth between support at the 1.2100 major psychological level and resistance at 1.2700. Price just bounced off the floor recently and seems to be setting its sights on the top of the range again.
Stochastic is on the move up to show that bullish pressure is present and that price could make its way up to the ceiling soon. However, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside.
In addition, the 100 SMA appears to be holding as dynamic resistance at the moment, although a move higher could still find resistance at the 200 SMA closer to the top of the range. Once stochastic hits the overbought zone and turns lower, more sellers could get back in the game and push for a drop to support again.
UK CPI reports turned out stronger than expected, with the headline figure up to 2.3% versus the 2.1% forecast and the core reading up from 1.6% to 2.0% versus the projected 1.7% figure. Underlying inflation reports also printed upbeat results, except for the PPI input prices which dipped 0.4%.
The pound also gained support from some signs of strength by the UK government in approaching Brexit negotiations. PM May already confirmed that they will invoke Article 50 to formally begin the exit process by March 29, removing speculations that they will not push through with Brexit.
Meanwhile, the dollar is giving up ground on weaker US equities performance and the lack of fiscal policy updates from the Trump administration. Fed officials continue to reiterate that at least three rate hikes are possible this year while data has been stronger than expected. Existing home sales data is due next.
By Kate Curtis from Trader’s Way