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GBP/USD breaks above the 1.2500 level

  • GBP/USD rises amid weak US data and a possible pause in Fed policy.
  • Despite the seven-month drop in the ISM PMI, Wall Street remains positive.
  • The UK is facing a sharp drop in house prices; high inflation triggers BoE adjustment speculation.

GBP/USD rises in the North American session driven by weak economic data from the United States, with a slowdown in business activity. In addition, US Federal Reserve (Fed) officials, who advocate a “jump” in its tightening cycle, cut the odds of a rate hike at the upcoming meeting in June. GBP/USD is trading around 1.2515 after hitting a low of 1.2400.

GBP/USD rises, the Fed considers a pause in the tightening cycle and Wall Street reacts to the seven-month fall in the ISM manufacturing PMI

Wall Street reacted positively to data from the Institute for Supply Management (ISM), which revealed that manufacturing activity fell for the seventh consecutive month. The ISM manufacturing PMI came in at 46.9, below April’s 47.1 and estimates of 47, as readings below 50 are considered recessive. Factors such as the Fed’s aggressive 500 basis point (bp) tightening weighed on the index as new orders tumbled.

The ISM data weighed on the US dollar (USD), as evidenced by the fact that GBP/USD surged from around 1.2470, breaking above 1.2500 again, following the release of two more US jobs reports, which triggered a bounce from 1.2440 towards the top.

When it comes to employment, the ADP National Employment Report showed private hiring rose by 278,000 in May, beating estimates of 170,000 but down from April’s astonishing 291,000. Although it showed signs that the labor market remains tight, this was confirmed by US jobless claims.

Initial jobless claims for the week ending May 27 rose by 232,000, disappointing the expected 235,000, but up from 230,000 the week before, a figure revised lower.

Given the latest round of data, Philadelphia Fed President Patrick Harker is expected to make some remarks later in the day. However, GBP/USD traders should keep in mind the latest remarks by Fed Governor Philip Jefferson, in which he pointed to a rate hike at the June meeting, comments Harker seconded. However, Harker added that the incoming data could “change your mind.”

On the other hand, the British calendar revealed that house prices registered the biggest drop since 2009, blamed on the rise in interest rates by the Bank of England (BoE). The latest inflation report shows signs of easing, but it is still four times above the BoE’s target. Following the release of the Consumer Price Index (CPI), investors forecast further tightening from the BoE.

GBP/USD Price Analysis: Technical Perspective

GBP/USD Daily chart

GBP/USD resumed its bullish trajectory after spending two days stuck to the bottom of the 20-day EMA at 1.2441. Fundamental news supported the Pound’s appreciation, and since reclaiming the 1.2500 figure, the path of least resistance is north. The next resistance levels lie at the May 16 high at 1.2546 and the 1.2600 figure. Technical indicators such as the Relative Strength Index (RSI) and the 3-Day Exchange Rate (RoC) show that the bulls are gaining momentum, so any pullback could serve to resume the overall uptrend.

GBP/USD

Overview
Last price today 1.2523
daily change today 0.0083
today’s daily variation 0.67
today’s daily opening 1,244
Trends
daily SMA20 1.2474
daily SMA50 1.2444
daily SMA100 1.2295
daily SMA200 1.1987
levels
previous daily high 1.2444
previous daily low 1.2348
Previous Weekly High 1.2472
previous weekly low 1.2308
Previous Monthly High 1,268
Previous monthly minimum 1.2308
Fibonacci daily 38.2 1.2408
Daily Fibonacci 61.8% 1.2385 1.2385
Daily Pivot Point S1 1.2377
Daily Pivot Point S2 1.2315
Daily Pivot Point S3 1.2281
Daily Pivot Point R1 1.2474
Daily Pivot Point R2 1.2507
Daily Pivot Point R3 1,257

Source: Fx Street

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