GBP/USD Forecast: British pound stalls at Fibo resistance, technical levels remain in play

GBP/USD has staged a decisive recovery on Monday and erased a large portion of last week's losses before going into a consolidation phase on Tuesday.

In the absence of high-tier macroeconomic data releases and fresh headlines surrounding Brexit, GBP/USD's next direction is likely to be dictated by technical developments.

While speaking at a virtual event organized by the Bank of England (BoE), Governor Andrew Bailey reiterated that they will have to act with rates in case they see clear evidence of higher inflation feeding into wages. These comments don't seem to be having a noticeable impact on the market pricing of a rate hike in December. As it currently stands, the CME Group's BoEWatch Tool shows a 67.5% chance of a 20 basis points rate hike before the end of the year. 

Meanwhile, the EU is waiting for the UK to make the next move in Brexit negotiations after clarifying that they will match the scale of the action in case Britain were to trigger Article 16. 

Later in the session, the US Bureau of Labor Statistics will release the Producer Price Index (PPI) data for November, which is unlikely to offer any surprises. FOMC Chairman Jerome Powell and BoE's Bailey will be speaking at an event on Tuesday but it would be surprising to see any remarks on the policy outlook.

GBP/USD Technical Analysis

Currently, GBP/USD is trading near 1.3570 (Fibonacci 61.8% retracement of the latest uptrend). However, the last four candles on the four-hour chart closed below that level and the Relative Strength Index (RSI) indicator is moving sideways near 50, suggesting that the pair is struggling to gather bullish momentum.

In case GBP/USD climbs above 1.3570 and confirms it as support, it could target 1.3630 /Fibonacci 50% retracement, 50-period SMA) and 1.3660 (200-period SMA).

On the downside, the 20-period SMA forms the initial support at 1.3520 ahead of 1.3500 (psychological level) and 1.3475 (static level).