GBP/USD Analysis: The overnight big move up was sponsored by some heavy USD selling

The British pound was among the biggest movers on Thursday and rallied around 2.8% against its American counterpart. The US dollar extended its week-long decline amid easing concerns over tightening liquidity, all against the backdrop of the Fed's unlimited QE program and a massive $2.2 trillion US economic stimulus package. The greenback was further pressured by the Fed Chair Jerome Powell's comments, saying that there is still room for more action to combat coronavirus crisis. Adding to this, an unprecedented rise in US initial weekly jobless claims underscored the devastating impact on the economy from the coronavirus pandemic and did little to ease the bearish pressure surrounding the buck.

On the other hand, the disappointing release of UK monthly retail sales figures for February failed to influence the sterling or provide any meaningful impetus as it relates to the period before the coronavirus crisis. Meanwhile, the Bank of England on Thursday decided to keep interest rates unchanged at 0.10% and Assets Purchase Program at £ 645B. The accompanying policy statement indicated that MPC stands ready to expand asset purchase further if needed. As investors looked past the latest BoE policy update, the USD price dynamics turned out to be an exclusive driver of the pair's strong upsurge of around 450 pips from daily swing lows.

The pair edged higher for the fourth consecutive session on Friday – also marking its fifth day of a positive move in the previous six – and climbed to near two-week tops during the Asian session. The pair, for now, seems to have stalled momentum and was seen oscillating in a narrow trading band below the 1.2300 round-figure mark. In absence of any major market-moving economic releases, either from the UK or the US, developments surrounding the coronavirus saga might continue to drive the broader market risk sentiment. This along with the USD action should produce some meaningful trading opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the overnight sustained break through the 1.1940-50 supply zone was seen as a key trigger for bullish traders and some follow-through move up to the 50% Fibonacci level of the 1.3200-1.1412 steep decline. Meanwhile, technical indicators on the daily chart – though have been recovering – are yet to catch up with the recent strong positive momentum. Moreover, oscillators on hourly charts are pointing to slightly overbought conditions and warrant some caution for bulls. Hence, it will be prudent to wait for some near-term consolidation or a modest pullback before placing fresh bets for any further appreciating move.

In the meantime, any subsequent strength might now confront some resistance near the 1.2355-60 horizontal zone, above which the pair seems all set to surpass the 1.2400 round-figure mark and aim towards testing 61.8% Fibo. level. The latter stands near the key 1.2500 psychological mark and should keep a lid on any further gains, at least for the time being.

On the flip side, the 1.2200 round-figure mark now seems to protect the immediate downside, which if broken decisively, might prompt some aggressive technical selling and accelerate the corrective slide. The pair then might aim towards retesting sub-1.2100 level, or a support marked by 38.2% Fibo. level.