GBP/USD Forecast: Buyers turn hesitant as 1.2870 resistance holds

GBP/USD climbed to a daily high near 1.2870 in the early European morning on Tuesday but failed to preserve its bullish momentum. 1.2800 aligns as key support for the pair and a drop below that level could trigger a technical selloff.

The upbeat market mood on Chinese stimulus optimism made it difficult for the US Dollar (USD) to find demand during the Asian trading hours and allowed the pair to stage a rebound following a 7-day losing streak.

After the data from the euro area revived concerns over a recession in Germany, the Euro came under renewed selling pressure. The sharp decline seen in EUR/GBP cross suggests that Pound Sterling captures some of the capital outflows out of the euro, helping GBP/USD hold its ground for the time being.

The Conference Board will release the Consumer Confidence Index for July. Ahead of the Federal Reserve's two-day policy meeting that will commence later in the day, however, investors are likely to refrain from taking large positions.

In the meantime, US stock index futures trade mixed in the European session on Tuesday. A bullish opening in Wall Street in anticipation of positive earnings figures from tech giants Microsoft and Google Alphabet could limit the USD's gains.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart retreated to 40 following a recovery toward 50 earlier in the day, reflecting buyers' hesitancy.

On the downside, 1.2800 (200-period Simple Moving Average (SMA), Fibonacci 61.8% retracement of the latest uptrend) aligns as key support. A 4-hour close below that level could open the door for an extended decline toward 1.2730 (static level). 

GBP/USD's latest rebound confirmed 1.2870 as strong resistance. In case the pair rises above that level starts using it as support, 1.2900 (psychological level, 100-period SMA) and 1.2930 (Fibonacci 38.2% retracement) could be seen as next bullish targets.