- GBP/USD holds onto the previous rebound above 1.3650.
- Hotter UK inflation supports BOE rate hike calls, DXY drops amid risk recovery.
- Bull cross confirmation and bullish RSI allow room for more upside in cable.
GBP/USD is consolidating gains above 1.3650, as the bulls gather pace for the next push higher.
That said, the spot is looking to extend the previous day’s rebound from five-day lows of 1.3572, as buyers cheer encouraging fundamental and technical catalysts.
Faster-than-expected acceleration in the UK annualized inflation figure for December, which came in at 5.4%, reinforced expectations of an imminent Bank of England (BOE) rate hike in February to tackle the 30-year high inflation in the Kingdom.
Supporting the upside in the spot, the US dollar extends the corrective decline in Asia this Thursday, as the risk sentiment is improving amid more easing announced by the Chinese central bank, earlier today.
However, the ongoing upsurge in the US Treasury yields could help limit the dollar’s decline, in turn, capping cable’s rebound. Meanwhile, the looming Brexit and UK’s political uncertainty also threaten the pound’s recovery.
Technically, the 21-Daily Moving Average (DMA) crossed the horizontal 100-DMA for the upside on a daily closing basis, confirming a bull cross.
The 14-day Relative Strength Index (RSI) inches higher above the midline, backing the bullish view on the pair.
GBP/USD needs acceptance above 1.3650 to extend the recovery momentum towards the 1.3700 round level.
Ahead of that Tuesday’s high of 1.3681 could be challenged.
Alternatively, strong support awaits at around 1.3550, where the 21 and 100-DMA hang around, below which floors will open up for a test of the 1.3500 psychological level.
GBP/USD: Daily chart
GBP/USD: Additional technical levels