Starting the trading day, the GBP/USD currency pair is in a consolidation phase. Traders are looking ahead to important U.S. economic readings and guidance from Federal Reserve members. This period of stability follows a recent rally, with traders keenly focused on upcoming releases that could influence monetary policy expectations.
At 12:30 pm GMT today, the May Core Personal Consumption Expenditures (PCE) Price Index will be unveiled. This index is the Federal Reserve’s preferred indicator for inflation. It will be critically important in forming the central bank’s view on the likelihood of future rate cuts. Current forecasts predict a monthly increase of 0.1% and a 2.6% annual rise in the Core PCE Price Index, figures that align with April’s data. Given the findings, this report may further support or question future rate increase assumptions that many have accepted as a given.
Fed Governor Michael Barr will address attendees at the Cleveland Fed Policy Summit at approximately 1:15 pm EDT. That’s one way his remarks could help clear up the Fed’s confusing approach to monetary policy. This is particularly concerning given the recent trajectory of inflation. Later in the day, Barr will speak again at 4:00 pm EDT about community development and regional policy, allowing traders to gain additional insights into the Fed’s broader economic perspective.
The GBP/USD currency pair is now in a phase of consolidation. After solidly testing this area, it has since established firm support near the 1.3570–1.3610 level. This recent price action speaks volumes that the trading community is watching this area very closely as they wait to pounce on any sign of a buying opportunity. Currently, the key support level for GBP/USD is the 1.3610 region. That’s the key level that needs to be regained to set the stage for any future bullish setups.
Traders should be looking at the 1.3610 as the key level today. It shows just how important tactical decisions are about how to respond to incoming economic data releases. If this support level gets tested again, it could be an opportunity for traders to get in and out of positions. We deliberately left the stop-loss for our GBP/USD positions under the previous swing low at roughly 1.3542. This arrangement means that they have some protection from bad turn in market.
For anyone thinking about upward targets, the initial target for a long GBP/USD position lies at the former swing high of 1.3860. To get there, we’ll require some pretty powerful bullish momentum. This momentum might be fueled by the strong economic news or by the optimistic language found in Fed speakers.