GBPUSD closed confidently above the 1.2570resistance area on Wednesday after a short period of consolidation, raising hopes that the bounce off 1.2410 may get new legs in the short term ahead of today’s BoE policy announcement (12:00 GMT).
The pair is currently giving up some ground, but the positive trajectory in the RSI and the Stochastics, which have recently exited the oversold territory, and the gradual recovery in the MACD, are sending encouraging signals that buying appetite could soon return.
Immediate resistance to upside movements could pop up somewhere between the former barrier of 1.2670 and the 1.2740 mark. An extension above this region could retest the 20-day simple moving average currently (SMA) at 1.2811, while the lower band of the broken bearish channel is within breathing distance at 1.2850 and will be closely watched as any step higher from here could secure an acceleration to 1.3000. The 50-day SMA is nearing that number as well.
In the big picture, substantial efforts will be needed beyond 1.3300 to correct the bearish trend in the market.
In the event selling tendencies persist, pressing the price beneath 1.2485, the focus will shift back to the 1.2312 level, which coincides with the 61.8% Fibonacci retracement of the 2020 rally. Failure to pivot here could see a continuation towards the 1.2074 low from May 2020 and the 78.6% Fibonacci marginally lower at 1.2017.
All in all, despite its current weakness, GBPUSD has strengthened the case for an upside reversal following the cross above 1.2580 yesterday. On the other hand, a drop below 1.2485 could scrap such a scenario.