GBP/USD Price Analysis: Refreshes day high around 1.2330 as USD Index dives further, BoE policy eyed

  • The GBP/USD pair has reached a new day’s high of 1.2330 as the Dollar index continues to decline.
  • Every dip is viewed as a buying opportunity in the rising channel chart pattern that the cable is now trading in.
  • Further upside is assured by the RSI (14) shifting into the positive zone of 40.00–80.00.

In the early European session, the GBP/USD pair has reached a new day high of 1.2330. As the Federal Reserve (Fed) nears the stage of tightening policy, more weakness in the US Dollar Index (DXY) supports Cable’s upward tilt. The Pound Sterling is also being supported by increasing hawkish bets on Bank of England (BoE) policy following a surprising increase in UK inflation.

Bank of America Global Research (BoA) economists anticipate a dovish BoE rate increase of 25 basis points.

While attention has turned to risk-perceived assets, the Dollar Index is battling to hold above 102.00 and is likely to continue falling. Strong gains in S&P500 futures suggest that market participants’ appetite for risk has returned.

On a four-hour time frame, the GBP/USD currency pair is trading in a Rising Channel chart pattern, where each retreat is viewed by market participants as a buying opportunity. The Cable is moving in the direction of the horizontal resistance indicated by the high price of 1.2444 on December 13.

The bulls of the pound sterling are getting some support from the 20-period Exponential Moving Average (EMA) at 1.2245.

Further gain is predicted as the Relative Strength moves from the negative 20.00–60.00 zone into the bullish 40.00–80.00 level.

Because the Cable has already displayed a brilliant rebound, a mean-reversion move to close to the 10-period EMA 1.2275 would be the best opportunity for initiating new long positions. The asset will be driven by this in the direction of the high from December 5 at 1.2345 and the horizontal resistance indicated by the high from December 13 at 1.2444.

On the other hand, the Cable would be forced towards the round-level support near 1.2100 and the March 15 bottom near 1.2000 if it broke below the March 21 low at 1.2212.