GBP/USD Forecast: nearing 1-1/2 month old trading range hurdle, BOE’s inflation hearings in focus

On Monday, the GBP/USD pair jumped to a 2-1/2-week high level of 1.3279 and was being supported by news suggesting that the UK government was preparing to increase its offer for the so-called EU divorce bill. Meanwhile, EU's chief Brexit negotiator, Michel Barnier was noted saying that UK financial services providers will lose their EU passport after Brexit and prompted some profit-taking at higher levels. 

The pair gained some fresh traction on Tuesday and traded with a mild positive bias for the sixth consecutive session as investors look forward to the BOE’s inflation report hearings scheduled later today. The inflation report hearings could provide an important insight into the BOE’s outlook on inflation. Any hints towards easing inflationary pressures/growth would almost pour cold water on additional rate hike expectations and prompt some fresh GBP selling. 

From a technical perspective, the pair remains within a broader trading range held since early October and is currently placed near the upper band of the band. A sustained move beyond the 1.3260 area (50-day SMA) might continue lifting the pair towards the 1.3300 handle, which if cleared would point to a bullish breakout and pave way for an extension of the pair's upward trajectory. 

On the flip side, the 1.3210-1.3200 region now becomes an immediate support to defend, below which the pair could drift back towards the 100-day SMA support near the 1.3125 region. Some follow-through weakness has the potential to continue dragging the pair back below the 1.3100 handle towards testing the trading range support near the 1.3050-40 region.