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GBP/USD has been retreating from the highs amid a worsening market mood. Is the downside correction over? Not so fast, as GBP/USD has yet to make a convincing pullback that would allow for further gains. As FXStreet’s Analyst Yohay Elam notes, sterling is hobbled by overbought conditions – US inflation data is critical to the dollar’s next moves.

See:  GBP/USD to advance nicely towards 2018 highs near the 1.44 mark – Credit Suisse

Cable is still near overbought conditions  

“America publishes Consumer Price Index data for April later in the day, and core prices are set to top the 2% level. The calendar is pointing to a jump from 1.6% to 2.3% YoY. The greenback’s recovery and the damp mood in markets are showing that unless Core CPI leaps considerably beyond estimates, the dollar could snap back in a ‘buy the rumor, sell the fact’ response.”  

“Sterling has been benefiting from better than expected Gross Domestic Product figures for the first quarter in the UK. The economy shrank by only 1.5% during the first months of the year, which were dominated by the nationwide lockdown. Britain’s successful vaccination campaign also supports the pound.”

“GBP/USD continues benefiting from upside momentum on the four-hour chart and trades far above the 50, 100 and 200 Simple Moving Averages. However, the Relative Strength Index (RSI) is too close to 70 – flirting with overbought conditions. That makes every upside move limited in nature.”

“Resistance awaits at 1.4160, which is the fresh May high. Further above, 1.42 and 1.4240 are eyed. Support is at 1.4110, the daily low, and then 1.4075 and 1.4050.”