During Wednesday's European trading session, the GBPUSD currency pair succeeded in prolonging its early-day gains. They took bids above the mid-1.2600 level while represented 0.41% gains on the day mainly due upbeat trading sentiment, which undermined the broad-based U.S. dollar and contributed to the currency pair gains. The reason for the currency pair's bullish bias could also be related to the recent hotter-than-expected UK CPI data, which remained supportive of the bid tone surrounding the British pound. Whereas, China's latest warnings to the U.K. over the Huawei ban issue limited the British pound's optimism. At this moment, the GBP/USD currency pair is currently trading at 1.2608 and consolidating in the range between 1.2549 - 1.2613.
At the data front, the U.K. Consumer Prices Index (CPI) 12-month rate arrived at +0.6% in June compared to +0.5% booked in May while matched expectations of a +0.4% print, as per the report of U.K. Office for National Statistics (ONS). In the meantime, the core inflation gauge (excluding volatile food and energy items) came in at +1.4% YoY last month against +1.2% booked in May while beat the consensus forecast of +1.2%. Whereas, the monthly figures showed that the U.K. consumer prices arrived at +0.1% in June vs. 0% expectations and 0% last.
Apart from this, the upbeat market sentiment was supported by the hopes about the coronavirus vaccine, which overshadowed the concerns about surging COVID-19 cases in the U.S.
Furthermore, the risk-on market sentiment was moreover bolstered after the release of the latest U.S. consumer inflation figures, which showed that the headline CPI rose by 0.6% in June as compared to 0.5% expected and -0.1% previous. The yearly rate matched expectations and came in at 0.6%.
On the vaccine front, the highly anticipated coronavirus vaccine created by the Cambridge-based Moderna gave positive results for boosting immune response just as expected by the scientists and raised hopes for a virus-free economy. The expectations were further supported by President Trump's comments that the vaccine will be delivered in record-breaking time. This added in the market's risk appetite and added further in the GBP/USD pair gains. As in result, the S&P 500 Futures flashed gains 0.90% gains to 3,212, but the U.S. 10-year Treasury yields awaited fresh clues to extend the latest recoveries beyond 0.62%.
Despite the ever-increasing number of new coronavirus cases and the possibility of renewed lockdowns, the broad-based U.S. dollar failed to put any bid and reported losses on the day. However, the losses in the U.S. kept the pairs' prices high. Whereas, the U.S. Dollar Index that tracks the greenback against a basket of other currencies dropped by 0.11% to 96.073 by 9:50 PM ET (2:50 AM GMT).
At the Brexit front, the long-lasting UK-EU talks again stopped during the last meeting due to the "significant differences", as per the Bloomberg. As in result, the British Cabinet Minister warned businesses to stay prepared for the Brexit, irrespective of the outcome of the current discussions. However, the persistent Brexit-related uncertainties kept a lid on any additional gains in the pair.
Whereas the Dragon Nation's Foreign Ministry recently said in a statement on Wednesday, it strongly condemned the U.K.'s move over the Huawei ban. Also, he added, "China will take all measures to safeguard its interests." The market traders look forward to the U.S. economic docket, which will show the release of Empire State Manufacturing Index and Industrial Production. The market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum. Whereas, the updates concerning China-US Relations could not lose their importance.
Daily Support and Resistance
S1 1.2423
S2 1.252
S3 1.2571
Pivot Point 1.2617
R1 1.2668
R2 1.2715
R3 1.2812
The GBP/USD pair is heading north to test the double top resistance level of 1.2677 level that can be seen at 1.2670 level. Closing of candles below this level has the potential to go after 1.2797 level. The GBP/USD pair has recently formed three bullish engulfing candles that are expected to lead the GBP/USD prices further higher until 1.2677 level. Additionally, the RSI and MACD are also in support of the buying trend along with the upward channel that we can see on the 8-hour chart. Therefore, we should look for buying trade around 1.2600 level today. Good luck!