GBP/USD clings to gains above 1.2600 on softer US Dollar

GBP/USD is consolidating gains above 1.2600 in European trading on Monday. The US Dollar experiences downward pressure, influenced by market sentiment leaning towards the delayed Fed rate cuts. A US holiday-thinned trading is likely to extend. 

The Fibonacci 23.6% retracement of the latest uptrend aligns as immediate resistance at 1.2640. The 20-day Simple Moving Average (SMA) reinforces that hurdle as well. If GBP/USD stabilizes above that level, 1.2670 (200-period SMA on the 4-hour chart) and 1.2700 (psychological level, static level) could be set as next bullish targets.

On the downside, first support is located at 1.2600 (psychological level, static level, 50-period SMA) before 1.2540 (Fibonacci 38.2% retracement).

Fundamental Overview

GBP/USD registered losses in the previous week but closed slightly above the key 1.2600 level. At the beginning of the new week, the pair continues to inch higher and the near-term technical outlook points to a bullish tilt.

The US Dollar (USD) gathered strength in the early American session on Friday after the stronger-than-forecast January producer inflation from the US and caused GBP/USD to retreat below 1.2600. Ahead of the weekend, however, the USD lost its footing amid profit-taking and allowed the pair to erase its losses.

The economic calendar will not offer any high-tier data releases on Monday. Moreover, bond and stock markets in the US will remain closed in observance of the Presidents' Day holiday. Hence, the trading action is likely to remain subdued in the second half of the day.

Meanwhile, the UK's FTSE 100 Index opened near the previous week's closing level, highlighting a neutral market mood in the early European session.

On Wednesday, preliminary February Manufacturing and Services PMI surveys for the UK and the US will be looked upon for fresh impetus. Later in the day, the Federal Reserve will release the minutes of the January policy meeting.