- GBP/USD trades in a 50-pip range on Wednesday.
- Uninspiring macro data from the US didn’t allow the USD to recover.
- Gfk Consumer Confidence from the UK is coming up next.
Unlike most of the major pairs that showed high volatility on Wednesday, the GBP/USD pair fluctuated in a relatively narrow band and is now on track to close the day with small gains. After setting its daily top at 1.3305, the pair struggled to stretch higher during the NA session and was last seen trading at 1.3280, where it was up 0.2% on the day.
Earlier in the day, the data from the United States showed a lower-than-expected private sector employment growth with a 178K increase in May, as reported by the ADP. Furthermore, the second estimate of the first quarter GDP eased to 2.2% from 2.3%. Although the broad-based selling pressure witnessed on the buck following these data releases would normally help the USD denominated pairs gather bullish momentum, the GBP/USD pair failed to take advantage.
A sharp rise seen in the EUR/GBP pair seems to the primary reason behind the GBP’s difficulty to find demand. After reports of Italy’s 5-Star looking to have Savona withdraw his candidacy for the economy ministry, concerns over another election in Italy eased and the shared currency strengthen further against its peers. The EUR/GBP pair added more than 70 pips on the day to retrace all of its losses that it suffered on Monday and Tuesday and forced the demand for the GBP to remain low throughout the day.
In the early trading hours of the Asian session on Thursday, the GfK Group will publish the May Consumer Confidence data for the UK. Experts expect the index to improve slightly to -8 from -9 in April. A positive reading could help the GBP erase some of its losses against the EUR and build on its recent gains against the greenback. However, any market reaction is likely to be short-lived as investors will be waiting for the political drama in Italy to reach a conclusion before taking any large positions.
Technical outlook
The initial support for the pair aligns at 1.3200 (psychological level/May 29 low) ahead of 1.3120 (Nov. 12 low) and 1.3040 (Nov. 2 low). On the upside, resistances could be seen at 1.3325 (May 29 high), 1.3440 (20-DMA) and 1.3500 (psychological level).
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