GBP/USD is trading back above 1.2500, reversing losses led by the mixed UK labor market report. The US Dollar has resumed its corrective downside amid a recovery in risk sentiment. Traders await the US data and debt ceiling updates.
The Relative Strength Index (RSI) indicator on the four-hour chart recovered to 50 but GBP/USD is yet to make a four-hour close above the 100-period Simple Moving Average (SMA), which acts as dynamic resistance at 1.2540.
If GBP/USD clears that level and starts using it as support, it could target 1.2570 (50-period SMA) and 1.2600 (psychological level, static level).
On the downside, first support aligns at 1.2500 (20-period SMA, psychological level, static level) ahead of 1.2480 (200-period SMA) and 1.2450 (static level, Fibonacci 23.6% retracement of the latest uptrend).
GBP/USD has regained its traction and climbed above 1.2500 after having dropped below that level in the early European morning. The pair, however, is having a difficult time gathering bullish momentum as the dynamic resistance at 1.2540 stays intact.
The data published by the UK’s Office for National Statistics revealed on Tuesday that the Claimant Count Change came in at +46.7K in April, compared to the market expectation for a decrease of -10.8K. Moreover, the ILO Unemployment Rate ticked up to 3.9% from 3.8%. Although these figures highlight looser conditions in the UK labor market, wage inflation remains relatively hot. Average Earnings Including Bonus rose 5.8% in the three months to March, matching the previous reading and surpassing analysts’ forecast of 5.1% by a wide margin and allowing Pound Sterling to stay resilient against its rivals.
According to Reuters, markets still see a 68% probability of a 25 basis points (bps) Bank of England (BoE) rate hike in June.
In the second half of the day, April Retail Sales and Industrial Production data will be featured in the US economic docket. On Monday, the disappointing Empire State Manufacturing survey forced the US Dollar (USD) to stay under bearish pressure. A similar reaction could be witnessed in case these data point to a weakening consumer activity and vice versa.
Meanwhile, US stock index futures turned flat on the day in the European morning after having stayed in the negative territory in the Asian session. In case risk flows continue to dominate the action, GBP/USD could gather recovery momentum. Nevertheless, investors could stay away from risk-sensitive assets ahead of US President Joe Biden’s meeting Republican House of Representatives Speaker Kevin McCarthy and three other top congressional leaders at 1900 GMT for the next round of debt limit negotiations.
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