GBP/USD posts modest gains above the mid-1.2600s amid mixed US data

The GBP/USD pair posts modest gains above the mid-1.2600s during the early Asian trading hours on Friday. The decline of the US Dollar provides some support to the major pair. 

Technical Overview

GBP/USD was last seen trading a few pips above 1.2700 (psychological level, static level). In case the pair confirms that level as support, 1.2760 (static level) could be seen as next bullish target before 1.2800 (psychological level, static level).

On the downside, the 50-day Simple Moving Average (SMA) forms dynamic support at around 1.2680 before 1.2650-1.2660 (Fibonacci 23.6% retracement of the latest uptrend, 200-period SMA on the 4-hour chart).

Fundamental Overview

GBP/USD broke above its three-week-old trading range and touched its highest level since early February above 1.2700 on Thursday. The broad-based selling pressure surrounding the US Dollar (USD) fuels the pair's rally as investors' focus shifts to the UK and US PMI data. Market participants will also pay close attention to the risk perception as US stock index futures post impressive gains in the European morning.

Improving market mood caused the USD to lose interest during the Asian trading hours on Thursday. Although Wall Street's main indexes were little changed for the day, upbeat earnings figures from Nvidia after the closing bell attracted risk flows. At the time of press, Nasdaq futures were up nearly 2% on the day and S&P futures were rising 1%. If the risk rally gains momentum in the second half of the day, the USD could continue to weaken against its rivals.

In the European session, S&P Global/CIPS Manufacturing and Services PMI data will be featured in the UK economic docket. In January, UK PMIs came in above market expectations and helped Pound Sterling stay resilient against its rivals. The Composite PMI is expected to stay unchanged at 52.9 in February's flash estimate to show an ongoing expansion in private sector's economic activity. A better-than-forecast print could provide a boost to GBP/USD with the immediate reaction. On the other hand, a reading below 50, which would point to a contraction, could weigh on Pound Sterling and cause the pair to stage a downward correction.

In the second half of the day, S&P Global will also release preliminary Manufacturing and Services PMI surveys for the US. Both of those PMIs are seen holding steady slightly above 50. If the details of the Services PMI survey point to an acceleration in input inflation, the USD could find a foothold. Unless there is a negative shift in risk mood, however, the USD's gains are likely to limited.