GBP / USD retraces from multi-week highs above 1.3550

• GBP / USD has retraced from the previous session’s highs above 1.3550, but is still well supported above 1.3500.
• British Prime Minister Boris Johnson again downplayed the need for stricter closures in the UK, which may have helped the GBP.

The GBP/USD it has fallen back from the previous session’s highs above 1.3550 (the pair’s highest levels since early November) in recent trading and has returned to roughly the line it opened at for the year at 1.3525. That means it is still trading up about 0.4% or more than 50 pips on the day, having rallied from Asian session levels at the 1.3475 area, with Monday’s dip towards the 50-day moving average at the 1.3420 zone (at the time) having now proven to have been a good entry point for short-term bullish speculators.

Technicians note support at the 1.3550 area (recent highs) and the 1.3400 low (this week’s lows and 50 DMA). For now, it appears that the pair’s uptrend, which has seen it rebound from lows below 1.3200 as recently as mid-December (a rally of more than 2.5%), remains intact. Provided there is no sharp decline for the pair in the next few days, GBP / USD’s 21 DMA should cross above its 50 DMA, which may increase short and medium-term buying interest in the pair.

The GBP / USD pair was driven primarily by risk appetite and USD flows on Tuesday. On the former, risk appetite remains positive, as emphasized by recent rallies in long-term developed market government bond yields to trade on a more optimistic economic outlook for 2022 and beyond, which It seemed to help the British pound on the day. In fact, risk-sensitive sterling was the second best performing G10 currency the day after the AUD, perhaps helped by the fact that British Prime Minister Boris Johnson continues to signal that no tightening is needed. the closures to stop Omicron’s broadcast in the UK. .

The pair also received some help during the US hours following mixed US economic data but the data has not been interpreted to broadly alter the prevailing narrative that the US economy is in. a state of strong growth, high inflation (although it is expected to decline in 2022) and a tight labor market. This story will get more information later in the week in the form of ISM’s services PMI survey and December’s official employment report, but all arrows at this stage point to the Fed continuing to adjust this year. The FOMC Minutes, which are expected to contain an aggressive bias to reflect the aggressive policy announcement, will be released on Wednesday, with traders looking for quantitative tightening comments. That suggests bullish risks for the USD later this week.

Technical levels