The GBPUSD is extending its rally after weaker-than-expected U.S. Producer Price Index (PPI) data reinforced the view that inflation pressures continue to ease. Following yesterday’s softer CPI report, today’s PPI release added to the disinflation narrative, prompting another wave of U.S. dollar selling. Treasury yields also moved lower, with the two-year yield falling around 4 basis points as traders further reduced expectations for Fed tightening at least in the near term. The combination of a weaker dollar and lower yields has provided another tailwind for sterling, allowing the pair to build on yesterday’s gains.
From a technical perspective, the bullish momentum has pushed the GBPUSD to a new session high, where it is now testing a significant resistance cluster. The rally has reached the 61.8% retracement of the decline from the May 1 high, while also challenging the series of highs that have capped advances since June 10. Together, those technical levels define an important resistance zone between 1.3446 and 1.3465, with the key retracement level coming in at 1.34598.
This is an area where sellers have previously stepped in, making it an important test for buyers. A decisive move above the resistance cluster would represent another technical victory for the bulls and should increase confidence that the recent recovery has further room to run. If buyers can sustain momentum above 1.3465, the focus shifts toward the May 29 high at 1.34854, followed by the May 25-26 swing high at 1.35089.
Conversely, if sellers are able to defend the resistance zone once again, traders could see another period of consolidation as the market digests the recent gains. For now, however, the combination of softer U.S. inflation data, a weaker dollar, and lower Treasury yields continues to favor buyers, with the resistance zone between 1.3446 and 1.3465 serving as the key technical hurdle that will determine whether the rally can extend further.
This article was written by Greg Michalowski at investinglive.com.
