Down from multi-year highs, limited upside potential

• GBP / USD gained strong positive traction on Wednesday and soared to new multi-year highs.
• The slightly overbought RSI on the hourly charts capped gains amid a modest intraday USD bounce.
• The setup still favors bullish traders and supports the prospects for further short-term earnings.

The pair GBP/USD It was based on overnight bullish breakout momentum through the 1.3755-60 congestion zone and spiked to the highest level since April 2018 on Wednesday. Stagnant momentum pushed the pair to just above 1.3850, although a modest intraday rebound in the US dollar limited the rise.

In the context of expectations of a massive US fiscal spending plan, the prevailing risk climate provided a modest increase in US Treasury yields This, in turn, was seen as a key factor that extended some support to the dollar and kept any further gains for GBP / USD limited.

Other than this, the slightly overloaded RSI on the hourly charts prevented bullish traders from placing new bets. However, technical indicators on the daily chart are still far from being in overbought territory and support prospects for an extension of strong post-BoE positive momentum.

Therefore, any significant pullback could be seen as an opportunity to initiate new bullish positions and remain limited near the resistance break point of 1.3760-55. GBP / USD appears poised to rise past the intermediate resistance at 1.3880 and aim to rebound to the 1.3900 level.

That said, a sustained break below the aforementioned resistance-turn-support could spark some technical selling and accelerate the slide towards 1.3700. This is closely followed by support near the horizontal zone of 1.3680, which if broken will negate the short-term constructive outlook.

4 hour chart

Technical Levels