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GBP/USD Daily Chart Analysis

GBP/USD Steady Near 10-DMA, Eyes U.S. Payrolls; 1.2674 Key Support

GBP/USD remains steady near its 10-day moving average at 1.2731, down 0.07% in early North American trading, as traders focus on the upcoming U.S. payrolls data on Friday. Despite lower long-term U.S. Treasury yields and weaker-than-expected UK manufacturing PMI data, the currency pair has held its ground. This week, ISM manufacturing and services data, as well as JOLTS, may influence the market. Under the current interest rate conditions, GBP/USD is expected to remain close to recent trend highs, with rate futures suggesting that the Bank of England (BoE) and the Federal Reserve (Fed) will follow similar rate paths until the end of the year. However, the slightly more dovish outlook from the BoE and persistent U.S. inflation could lead to a stronger USD. Comments from Minneapolis Fed President Neal Kashkari, indicating that interest rates should remain on hold for an extended period, support this view. Unless UK inflation reduction efforts prove successful, the lack of significant progress in U.S. inflation metrics, such as the recent core PCE price index, adds to the downside risks for GBP/USD.

Technically, GBP/USD has sustained Monday’s gains and is targeting the March high, trading within a range of 1.2802-1.2818 with moderate interest. UK May spending and retail sales data, likely impacted by wet weather, are in focus, with 87% of Barclays customers expressing concern about higher household bills. In the absence of tier-one UK data or BoE speeches, risk appetite and USD movements will guide GBP. Daily momentum studies remain firm, with the 5, 10, and 21-day moving averages rising and the 21-day Bollinger bands climbing, indicating a positive setup. A close below the rising 1.2674 21-DMA would end the upward bias. Monday’s break of last week’s 1.2801 high targets the 1.2893 March top. Sterling bulls remain strong after soft U.S. ISM manufacturing data caused U.S. Treasury yields to fall, with GBP/USD up 0.27% to 1.2780 in North American afternoon trade. Resistance levels are at 1.2803 (March 21 high), 1.2828 (upper 30-day Bollinger band), and 1.2894 (2024 high on March 8), while support is at 1.2745 (10-HMA), 1.2694 (Monday low), and 1.2661 (21-DMA). Although a slightly more dovish BoE rate expectation for 2024 may temper GBP gains, the technical setup remains positive in the absence of significant fundamental shifts.