Rises to new two-month highs above the 1.3200 level

• GBP / USD gains some traction on Tuesday and shoots up to more than a month high.
• The setup favors the bulls and supports the prospects for additional earnings.
• Only a sustained break below the 1.3080 region will negate the positive bias.

A sudden spike in demand for the British pound has pushed GBP / USD above the 1.3200 level, the highest level since September 7, during the European session on Tuesday. At the time of writing, the pair remains close to the daily highs around the 1.3240-45 region.

Given last week’s bounce from near a support marked by the 23.6% Fibonacci retracement of the 1.3482-1.2676 dip, around 1.2850, the latest move sets the stage for further gains. The bullish outlook is reinforced by the fact that the GBP / USD pair has now found acceptance above the 61.8% Fibonacci retracement.

Therefore, some continuation force to test the horizontal resistance at 1.3275-80, on its way to the round 1.3300 level, seems like a clear possibility. Momentum could extend further and push the pair towards resistance at the daily closing highs of early September, around the 1.3380-85 region, ahead of the 1.3400 level.

On the other hand, any significant pullback now could be seen as an opportunity to initiate new bullish positions. This, in turn, should help limit the decline near 1.3150. That said, a sustained break below that level could spark some technical selling and drag the GBP / USD pair towards the round 1.3100 level.

This level is closely followed by 50% Fibonacci, around the 1.3080-75 region, which if decisively broken will nullify the constructive setup. The GBP / USD pair could become vulnerable to further accelerate the decline and test the 38.2% Fibonacci, just below the key psychological level of 1.3000.

GBP / USD daily chart