GBP/USD Forecast: Bears to retain control as long as 1.2400 stays intact

• GBP/USD has managed to stage a rebound from multi-week lows.
• 1.2400 aligns as key near-term resistance for the pair.
• Hawkish BoE bets could help Pound Sterling limit its losses.

GBP/USD has reversed its direction and recovered above 1.2350 early Thursday after having touched its lowest level since early April at 1.2330. The near-term technical outlook suggests that sellers are likely to retain control unless the pair flips 1.2400 into support.

Although stronger-than-expected Consumer Price Index (CPI) data from the UK revived expectations for additional Bank of England (BoE) rate hikes, the persistent US Dollar (USD) strength forced GBP/USD to remain under bearish pressure. 

The USD capitalized on risk aversion mid-week, with investors growing increasingly concerned about the uncertainty surrounding the US debt-limit negotiations. Moreover, comments from Federal Reserve (Fed) Governor Christopher Waller attracted hawkish Fed bets and allowed the USD to continue to outperform its rivals. Waller refrained from committing to a pause in rate hikes at the next meeting. "Prudent risk management may suggest skipping a hike in June, leaning toward July hike depending on inflation data and if banking conditions haven't tightened excessively," he explained.

In the meantime, money markets are currently fully pricing in an additional 100-basis-points BoE rate hikes by December, according to Reuters. In case the USD loses interest via a positive shift in risk sentiment, the market positioning could further boost the Pound Sterling and open the door for a decisive rebound in GBP/USD.

In the second half of the day, the US Bureau of Economic Analysis will announce the first revision to the first-quarter Gross Domestic Product (GDP) growth, which is unlikely to have a noticeable impact on the USD's valuation.

The US Department of Labor's weekly Initial Jobless Claims data will also be looked upon for fresh impetus. In the past few weeks, we have seen a negative impact on the USD when claims rose sharply and vice versa. Hence, a similar short-term reaction could be witnessed in the early American session. 

GBP/USD Technical Analysis

GBP/USD climbed into the upper-half of the descending regression channel and the Relative Strength Index (RSI) indicator on the four-hour chart recovered above 40, suggesting that the pair is staging an upward correction.

The upper-limit of the descending channel aligns as strong resistance at 1.2400. The 20-period Simple Moving Average (SMA) reinforces that level as well. In case GBP/USD rises above that level and starts using it as support, it could extend its recovery toward 1.2450 (Fibonacci 23.6% retracement of the latest uptrend, 50-period SMA) and 1.2480 (200-period SMA).

On the downside, first support is located at 1.2340 (lower limit of the descending channel, static level) ahead of 1.2300 (psychological level, static level) and 1.2240 (Fibonacci 50% retracement).