GBPUSD Locked Sideways. Is A Breakout Imminent?

GBPUSD made marginal gains in the early European trading session on Monday as markets in the Eurozone remained closed for the Easter Holiday. The trading pair exchange rate was up by 0.01%  to go for 1.2624 in a muted session mirroring the Friday pattern. The US markets are open and traders have opted to adopt a wait-and-see approach ahead of PMI readings that could provide some volatility.

The US dollar remains stronger than most of the other major global currencies, with the DXY index reading above 104.00 for the last five trading sessions. However, the margin of gains by the greenback has reduced significantly, and this is reflected in the GBPUSD pair’s sideways movement over the past week. In fact, the pound gained 0.18% over the US dollar in the last week.

Furthermore, support from US Treasury bonds has reduced significantly, limiting the upside for by the dollar. Yields on benchmark 10-year and 5-year bonds stood slightly above 4.100% as of this writing.

The US economy printed out weak data on Friday, with the Personal Consumption Expenditure (PCE) index coming short of expectations. The Core PCE Price Index (excluding food and energy) fell from 0.5% in February to 0.3%, meeting the target figure month-over-month. Similarly, the figure fell from 2.9% to 2.8% year-over-year.  However, on a positive note, Personal Spending increased by 0.8%, beating the the forecast estimate of 0.5%. The highlight of the week will be the release of the February US Non-Farm Payroll figures on Friday, and this could unlock the consolidation seen on the dollar over the past week.

Technical analysis

GBPUSD has a weak upward momentum, with the RSI favouring the downside. The buyers will need to push the pair to go above the 1.2630 pivot to build upward momentum. A move above the next resistance at 1.2638 cold build the momentum to test 1.2646. However, if resistance persists at 1.2630, a break below the 1.2623 support looks more likely. Furthermore, that move will build downward momentum that will invalidate the upside narrative and instead see the pair test the next support at 1.2614.