GBP/USD Forecast: Additional gains likely above 1.1730

GBP/USD has preserved its bullish momentum and climbed to its highest level in two weeks above 1.1700 early Tuesday. The greenback's lacklustre performance helps the pair continue to stretch higher and the technical outlook suggests that the bullish bias stays intact in the near term.

The data from the UK showed on Tuesday that the ILO Unemployment Rate declined to 3.6% in three months to July from 3.8%. On a negative note, the Claimant Count Change arrives at 6.3K, worse than the market forecast for a decline of 9.2K. Further details of the jobs report revealed that wage inflation, as measured by the Average Earnings Including Bonus, rose by 5.5% in the same period, compared to analysts' estimate of 5.2%. The strong wage inflation print helped the British pound hold its ground ahead of the Bank of England's monetary policy announcements next week.

Meanwhile, the market mood remains upbeat following the risk rally witnessed on Monday and makes it difficult for the dollar to find demand. The UK's FTSE 100 Index is posting modest gains and the US stock index futures are up around 0.5%. 

In the early American session, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for August. The annual CPI is expected to decline to 8.1% in August from 8.5% but the Core CPI is forecast to edge higher to 6.1% from 5.9% in the same period. In case the annual core inflation figure comes in lower than expected, the dollar could face renewed selling pressure in the second half of the day and open the door for another leg higher in GBP/USD. On the other hand, strong CPI numbers are likely to provide a boost to the dollar. Nevertheless, the CME Group's FedWatch Tool shows that markets are already pricing in a nearly 90% probability of a 75 basis points Fed rate hike in September, suggesting that the USD doesn't have much room on the upside.

GBP/USD Technical Analysis

The pair continues to trade above the one-week-old ascending trend line and the Relative Strength Index (RSI) indicator on the four-hour chart holds above 60, showing that the bullish bias stays intact in the short term. Moreover, the pair closed the last seven four-hour candles above the 100-period SMA.

On the upside, the pair faces immediate resistance at 1.1730, where the Fibonacci 38.2% retracement of the latest downtrend is located. In case the pair rises above that level and starts using it as support, it could target 1.1800 (psychological level) and 1.1830 (Fibonacci 50% retracement).

Initial support is located at 1.1700 (psychological level) before 1.1650 (ascending trend line, 100-period SMA) and 1.1600 (psychological level, Fibonacci 23.6% retracement).