The British pound is trading defensively against the US dollar on Tuesday, staying below the 1.3600 level during European market hours. Investor sentiment remains cautious as tensions in the Middle East continue and markets wait for high-impact economic data from the United States and the United Kingdom.
Traders are holding back from making strong directional bets ahead of the US Retail Sales report, which could provide clues about consumer demand. Broader uncertainty over upcoming central bank decisions is also limiting market activity.
On the technical front, the Relative Strength Index (RSI) on the 4-hour chart remains slightly under the 50 mark. GBP/USD is also trading below both the 20-period and 50-period Simple Moving Averages (SMA), signaling a bearish bias in the short term.
Support for the pair is seen at 1.3530, where the 100-period SMA lies. Additional support levels are noted at 1.3500 and 1.3430, the latter aligning with the 200-period SMA. On the upside, resistance levels stand at 1.3570 (20-period SMA), 1.3600 (psychological and static level), and 1.3630 (mid-point of the recent ascending channel).
On Monday, GBP/USD managed to inch higher due to a slight improvement in risk sentiment. A Wall Street Journal report indicated that Iran may be willing to de-escalate tensions with Israel and resume nuclear talks. This helped global equities close higher and temporarily weakened the dollar as investors sought riskier assets.
However, sentiment turned more cautious early Tuesday. The US dollar regained some strength amid renewed geopolitical concerns. Reuters, citing Iran’s state news agency IRNA, reported that Iran had launched a stronger wave of missiles toward Israel. A senior Iranian commander also stated that hundreds of drones were expected to target Israel soon.
Later today, investors will focus on US Retail Sales and Industrial Production data for May. A disappointing reading on Retail Sales could weigh on the dollar in the short term. Still, unless US equity markets open on a strong note, the greenback may continue to benefit from its safe-haven status.
Looking ahead, UK inflation data will be released early Wednesday. The Office for National Statistics is set to publish the Consumer Price Index (CPI) report for May. The outcome could influence expectations ahead of the Bank of England’s policy decision, which is scheduled for Thursday. Markets widely anticipate that the central bank will keep the interest rate unchanged at 4.25%.
Later on Wednesday, the US Federal Reserve will announce its latest interest rate decision. The central bank is also expected to release an updated Summary of Economic Projections, offering insights into the Fed’s future policy path.
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