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GBP/USD is seeing a decent pullback after busting above the 1.2400 key resistance zone.

Can the pair end the month with new March highs?

Before moving on, ICYMI, yesterday’s watchlist looked at NZD/JPY’s technical resistance amidst a risk-taking environment. Be sure to check out if it’s still a valid play!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

Lower consumer spending numbers helped drag U.S. GDP from 2.7% to its final reading of 2.6% in Q4 2022.

U.S. initial jobless claims inched up by 7,000 to 198,000 in the week ended March 25, its first increase in three weeks

Speaking to the National Association for Business Economics, U.S. Treasury Secretary Janet Yellen called for stronger regulation of the non-bank or “shadow bank” sector that includes money market funds, hedge funds, and crypto assets.

Tokyo’s core CPI – a leading indicator of Japan’s inflation – rose by 3.2% y/y in March, marking the second consecutive month of deceleration since the 40-year high of 4.3% in January.

Japan’s unemployment rate ticked up by 0.2 points to 2.6% – its first increase in five months – as employees seek better working conditions.

Easing semiconductor shortages helped boost Japan’s industrial production by another 4.5% m/m in February

Japan’s retail sales jumped from 5.0% to 6.6% y/y in February. This marks the steepest gain since May 2021.

Slow global demand and highs costs drag China’s manufacturing PMI from 52.6 to 51.9 in March but easier COVID policies boosted the services PMI to its 12-year highs of 58.2.

Japan’s housing starts dip by 0.3% y/y in February after a 6.6% surge in January

The U.K. economy grew by 0.1% in Q4 and avoided a formal recession thanks to increased tourism and governmental assistance for energy costs.

Slide in U.K.’s house prices accelerated from 1.1% to 3.1% in March, the fastest annual decline since July 2009.

Switzerland’s real, seasonally adjusted retail sales grew by 0.3% y/y in February after a 2.2% dip in January

Germany’s retail sales down 1.3% m/m in February, marking the third consecutive month of decreases, due to high inflation and sluggish consumer demand.

Easing energy prices slowed France’s inflation from 6.3% y/y in February to 5.6% y/y in March.

The IMF believes the BOJ should consider allowing longer-term interest rates to move more flexibly to help ease strains in Japan’s financial institutions.

The U.K. was accepted into the 11-economy Trans-Pacific Partnership, which could add 1.8 billion GBP to the GDP over time.

Price Action News

Overlay of JPY Pairs 15-min

Overlay of JPY Pairs 15-min

Asian session traders tracked their Wall Street counterparts. That is, they mostly priced in easing banking concerns and the possibility of the Fed not being as hawkish in its next policy announcement than the members were less than a month ago.

JPY, which opened the day near yesterday’s lows, dropped further and across the board to make new intraweek lows.

Profit-taking ahead of the U.S. core PCE price index and the end of Q1 eventually pulled JPY back up to near its daily open price but the arrival of European session traders dragged the safe-haven back down to its daily lows.

Upcoming Potential Catalysts on the Economic Calendar:

Eurozone CPI flash estimate at 9:00 am GMT
Eurozone’s unemployment rate at 9:00 am GMT
Canada’s monthly GDP at 12:30 pm GMT
U.S. core PCE price index at 12:30 pm GMT
U.S. Chicago PMI at 1:45 pm GMT
U.S. revised UoM consumer sentiment and inflation expectations at 2:00 pm GMT
ECB President Lagarde to give a speech at 3:00 pm GMT

Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️

GBP/USD: 15-min

GBP/USD 15-min Forex Chart

GBP/USD 15-min Forex Chart by TradingView

I don’t know if you noticed but GBP/USD managed to bust above the 1.2400 major psychological level yesterday!

The bears have since stepped in, however, and now the pair is back at the 1.2360 zone.

As you can see, Cable’s current prices line up with the 50% Fibonacci retracement of the last major upswing, a resistance area from earlier this week, AND today’s open prices.

Does this mean that GBP/USD is just taking a breather after an upside breakout?

TBH, the pair’s next intraday direction will depend on today’s U.S. core PCE price index report.

Markets see the Fed’s preferred inflation gauge printing lower monthly acceleration, which would give the Fed one more reason to not be as hawkish in its next policy announcement.

It also doesn’t hurt GBP that the U.K. just narrowly avoided a technical recession AND got accepted into an 11-economy trading group that could yield the economy billions over the years. All in one day!

I’ll be on the lookout for more risk-taking that could push GBP/USD back to its weekly highs.

But if today’s markets focus on global economic concerns, or if the core PCE price index data favors more Fed rate hikes, then GBP/USD could retest lower inflection points like 1.2330.