GBP/USD Advances But Remains Confined Within 2-Week Range

GBP/USD printed a near-term bottom after briefly dipping below the 1.2500 handle last week, but has not been able to regain its prior upward momentum since then.

Resistance near the 1.2650 continues to block rallies for the pair and a range has formed as a result.

The easing of lockdown restrictions since early July has underpinned Sterling although some economic data points to underperformance during a time where the economy is expected to bounce back firmly.

Last week, GDP growth figures fell short of analyst expectations which caused a brief dip below the 1.2500 level. Later today, two members of the Bank of England are scheduled to speak, and their views on last week’s GDP miss could have an impact on the exchange rate.

There have also been concerns over the job market, especially when the stimulus measures supporting the labor market expire in about three months. Although last week’s data showed the unemployment rate holding steady at 3.9% in May while the forecast called for a rise to 4.2%.

Technical Analysis

GBP/USD is holding within a clearly defined range. To the downside, buyers have stepped in near the psychological 1.2500 support level which carries a confluence as the 20-day moving average is within proximity.

To the upside, sellers have consistently defended the 1.2650 area. The same area offered strong resistance back in April, and two approaches in that month resulted in notable pullbacks for the exchange rate.

The dollar has been under steady pressure for four consecutive weeks which has been underpinning the pound to dollar exchange rate. However, with the dollar index (DXY) trading at oversold levels, there is always the risk of a recovery.

Technical traders will likely be looking for a range break before taking a directional bias on the currency pair. A catalyst might be required for a break out of the range.

Bottom Line

• GBP/USD continues to hold in a range between 1.2500 and 1.2650.
• The economic calendar is relatively light for the week ahead. Two members from the Bank of England are scheduled to speak later today.

For a look at all of today’s economic events, check out our economic calendar.