GBPUSD Hangs on to Gains After Faltering US Housing Data

Summary:
• The GBPUSD trading pair has built on Monday's gains after weak US housing sales figures and weakening US dollar safe haven standing.

GBPUSD rose in the Asian session on Tuesday, on reduced dollar appeal, after Monday’s economic data sent mixed signals. The pair traded at 1.2652, having gained 0.12% at the time of writing, on a day with no scheduled release of UK economic data. While this might limit the upside for the pound, it also sets up the dollar for a potential continuation of the downside if today’s data misses the target.

The dollar’s upside on Monday was boosted when the US February building permits data beat forecasts. The reading had been forecast to come in at 1.518 million, but rose from January’s 1.489 million to reach 1.524 million. However, traders mostly held on for the more high-impact data from the new home sales figures. This saw GBPUSD stick to its downtrend in the intervening period on the daily chart.

The US economy recorded a decline in new home sales in February, pointing to a weak property market. The month saw a decline of -0.3% from a growth of 1.7% in January. In terms of absolute figures, there was a decline from 664,000 to 662,000. This was lower than the forecast figure of 675,000.  This will continue exerting downward pressure on the dollar on Tuesday at least until the release of Durable Goods Orders figures.

Meanwhile, yields on 10-year and 5-year US treasury bonds have stagnated around 4.200%, and this will provide support to the dollar. Also, the UN resolution on the Gaza ceasefire means that the dollar’s safe-haven appeal has eased on the geopolitical front, at least for now.

Technical analysis

The RSI on the GBPUSD currency pair signals upside momentum. However, the buyers will need to maintain the pair above the pivot at 1.2615 to sustain the upside. With the buyers in control, the pair will likely break the resistance at 1.2655, beyond which they could push it to test 1.2675. Conversely, a move below 1.2615 will favour control by the sellers. That could take GBPUSD to 1.2595, beyond which it will invalidate the upside narrative and potentially test 1.2575.