- GBP/USD continues to find strong support levels below 1.3600.
- Hotter UK inflation and a weaker US dollar help the pair rally.
- Impending bullish crossover and a bullish RSI add credibility to the pair’s corrective rally.
The pair GBP/USD is recovering above 1.3600, snapping a four-day losing streak after bulls faced rejection at the 200-day moving average, now at 1.3735.
The change in sentiment around the pound comes following a higher-than-expected UK annualized inflation figure for December, which came in at 5.4%. Hotter UK inflation raises the odds of a Bank of England (BoE) rate hike at its February 3 meeting, the first for this year.
Meanwhile, a recovery in risk sentiment appears to be weighing on the US dollar of safe haven, contributing to the rise of the GBP/USD pair. US dollar falls despite fresh two-year highs in 10-year US Treasury yields.
But nevertheless, Whether GBP/USD can hold its ground amid UK Brexit and political risks remains to be seen. “The Prime Minister’s attendance at Downing Street Garden’s ‘bring your own alcohol’ party during England’s first lockdown in May 2020 is putting his position at risk and political uncertainty weighing on the pound. Some MPs refuse to accept your statement that you thought it was a “work event”.
Technically, the downtrend in the pair has stopped just before the critical support at 1.3545, where the 21 SMA is ready to cross the 100 SMA, setting up a bullish cross.
This bullish cross in the making could keep GBP buyers hopeful as the rising 14-day RSI also adds credence to a possible move higher in the pair.
Looking up, the pair will gain traction only after a sustained move above 1.3650.
GBP / USD daily chart
GBP/USD additional technical levels
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