GBP/USD: CORRECTION AFTER UPDATING MARCH HIGHS

Current trend

The GBP/USD pair is trading around 1.2752, correcting after updating local highs on March 21 the day before. Market participants are closing some of their long positions ahead of the publication of updated April inflation statistics in the United States.

On Friday, the market will receive data on the Personal Consumption Expenditures - Price Index, which remain key for the US Federal Reserve in determining the vector of monetary policy. Analysts do not expect any changes compared to the March estimate, when the Core value added 0.3% month-on-month and 2.8% year-on-year. At 14:30 (GMT 2), investors will evaluate April data on Personal Income and Spending: the dynamics of Income in April is expected to slow down from 0.5% to 0.3%, and Spending may decrease from 0.8% to 0.3%. In the UK, at 10:30 (GMT 2) statistics on consumer credit will be published, the volumes of which are likely to decrease slightly from 1.577 billion pounds to 1.500 billion pounds in April, and Net Lending to Individuals may increase from 1.8 billion pounds to 2.0 billion pounds, while Mortgage Approvals according to Nationwide Building Society may rise from 61.325 thousand to 61.500 thousand. While market participants are guided by May data on Retail Prices from the British Retail Consortium (BRC): prices in the largest stores rose by 0.6% after –0.8% in April, reflecting the slowest pace in the last two and a half years, while the prices for non-food products fell by 0.8%, and food products adjusted from 3.4% to 3.2%. Consortium experts expect that inflationary pressure in the country will continue to weaken and consumer sentiment will improve.

On Thursday at 14:30 (GMT 2) the US will present data on Gross Domestic Product (GDP) for the first quarter: the annual figure is forecast to decline from 1.6% to 1.3%, which may increase pressure on the US Federal Reserve in the issue of transition to "dovish" rhetoric in the second half of 2024.

Support and resistance

Bollinger Bands in D1 chart show active growth. The price range is slightly narrowed, being spacious enough for the current activity level in the market. MACD histogram is showing a weak growth keeping a previous buy signal (located above the signal line). Stochastic approaching the level of "80" is trying to reverse into a downward plane, signaling in favor of the development of a corrective decline in the near future.

Resistance levels: 1.2771, 1.2810, 1.2850, 1.2900.

Support levels: 1.2734, 1.2700, 1.2650, 1.2600.

Trading tips

Short positions may be opened after a breakdown of 1.2734 with the target at 1.2650. Stop-loss — 1.2771. Implementation time: 1-2 days.

A rebound from 1.2734 as from support followed by a breakout of 1.2771 may become a signal for opening new long positions with the target at 1.2850. Stop-loss — 1.2734.