GBPUSD was the best-performing major currency pair in yesterday’s trading as data on US consumer confidence missed forecasts. It closed over 75 pips higher than its opening price at 1.3005.
According to the Conference Board, US consumers were less optimistic about their financial conditions this month than analysts expected. For February, the report printed at 130.7 and missed the 132.6 forecast. The reading for January was also revised downward from 131.6 to 130.4. The report weakened the dollar and allowed GBPUSD to trade higher because it is considered as a leading indicator of consumer spending. Analysts have begun to speculate that the Federal Reserve may cut rates three times this year if economic reports continue to miss forecasts.
Today, there are no reports scheduled for release from the UK. Meanwhile, the New Home Sales report from the US is due at 3:00 pm GMT. If it misses the 714,000 consensus, we could see GBPUSD extend its gains. Additionally, updated on the novel coronavirus could affect the direction of GBPUSD. There have been reports of the infection spreading throughout Europe. News about the coronavirus spreading in the UK could be bearish for the pound and stop the rally on GBPUSD.
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On the 4-hour time frame, we can see that rally in GBPUSD was enough for the currency pair to break resistance at the falling trend line. As of this writing, it is testing resistance at the 200 SMA. It is not uncommon for a currency pair to revisit its previous resistance level and test it for support. Therefore, if the rally on GBPUSD runs out of steam, it could fall to its previous trend line around 1.2943.
On the other hand, a closer look at the hourly time frame suggests that the currency pair may soon resume its rally. GBPUSD has been consolidating in a tight range for the past few trading hours after its surge. Consequently, a bullish flag has formed. A close above yesterday’s high at 1.3017 could mean that GBPUSD may soon rally to 1.3068 where it peaked on February 13.