GBP/USD consolidated recent gains on Wednesday as it struggles to maintain a foothold above the 1.27, and a combination of the RSI moving into overbought territory - above 70 – and a slight bearish divergence suggests that upside is exhausted.
That said, the trend remains tilted towards further gains should cable hold above its 200-DMA (1.2463).
A slight pushback on rate cuts from Federal Reserve’s, Thomas Barkin, has provided a modicum of support for the dollar, following Tuesday’s surprise dovish comments by the typically hawkish Christopher Waller.
Consequently, attention now turns towards Thursday’s PCE data before finishing up with Chair Jerome Powell’s fireside chat due Friday.
Should Powell provide similar rhetoric to Waller, this would likely prompt a renewed bid in cable, opening the doors towards a test of its 200-WMA (1.2843) in the lead up to the Fed’s December meeting.
For now, a pullback in sterling is likely to be greeted by dip buyers.
Keep in mind that seasonals are bearish dollar heading into year-end and now that Fed hawks are providing scenarios for easing policy, this will only exacerbate the typical trend.
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