An interesting situation occurred on the chart of the GBP/USD currency pair at the close of trading last week.
Price volatility has been influenced by the US dollar currency as the market reacts to the published United States (US) producer inflation data.
Following an upbeat data reading for January, the US dollar strengthened early, but weakened again at the close of the week's final session.
Meanwhile, the Pound currency crashed throughout the week with the presence of important UK economic data and the focus of the central bank including inflation, employment and economic growth data.
The price drop shown on the GBP/USD chart last week has reached around 1.25400 before the price tries to show a rise again towards the end of the week.
On Friday, price gains were seen stalled at the 1.26000 resistance and the decline displayed in the New York session when US producer inflation data was published, saw prices dip around 1.25600.
Then there was a price rebound until the breakthrough of 1.26000 reached the 1.26200 level before the price retreated slightly to the 1.26000 level again to close the last session.
The price hovered above the 1.26000 level at the opening of trading earlier this week with expectations that the price increase could continue further following the price position above the Moving Average 50 (MA50) support line on the 1-hour time frame of the GBP/USD chart.
If the price increase continues, the high level reached last week will be challenged which is around 1.26800.
The 1.27000 zone will also be watched for a price test on a continued bullish pattern or it is possible that the price will break through it this week.
On the other hand, if the price drops back below the 1.26000 level, a further decline in price will be expected to the level reached last week.
Next, the support zone at 1.25000 becomes the next target to be tested if the price drop continues.
