GBP/USD Edges Up to Fresh One-Month High

The British pound is seen above the 1.2500 handle to trade at highs not seen in a month. The upward momentum, however, is lacking and it remains to be seen whether there will be bullish follow-through.

UK Prime Minister Johnson left the hospital on Sunday and released a video message on Twitter thanking the NHS. During his one-week stay in the hospital, he spent several nights in intensive care. Johnson was optimistic in his message and said: “things could have gone either way”.

Volatility in GBP/USD is likely to remain subdued because of the holiday and the general lack of significant data releases over the next day or so. The US will release retail sales data on Wednesday and that is the next major data point the markets will tend to focus on. Retail sales figures are expected to show a decline of 8% in March from a half a percent drop in February.

On Friday, the US consumer price index was reported to decline 0.4% in March which was the first time the index declined in more than a year.

Technical Analysis

GBP/USD has been trending higher since March 19 and the upward break seen in early trading today signals that this trend remains intact.

However, the general lack of momentum suggests bulls will not be jumping on the opportunity of a break above prior highs.

Further, volatility has declined notably over the past few weeks which may lead to a potential range for the pair.

The US dollar index (DXY) trades at a fairly important technical area and GBP/USD bulls should be cautious as a result. The index is currently resting the same area that held it lower last year and then once again in February. The prior resistance may act as support for the dollar.

Bottom Line

• GBP/USD has broken to fresh highs but the lack of momentum suggests there may not be follow-through.
• Volatility is likely to slow ahead of Wednesday’s US retail sales report.