GBP/USD Forecast: Pound needs to clear 1.1600 to attract buyers

GBP/USD has gathered recovery momentum and advanced toward 1.1600 on Tuesday. The near-term technical outlook points to a bullish shift as investors await the US ISM Services PMI data for August.

Following Monday's choppy action amid the Labor Day holiday in the US, the risk-positive market environment made it difficult for the dollar to gather strength during the Asian trading hours on Tuesday and allowed GBP/USD to push higher.

The UK's FTSE 100 Index is trading in positive territory early Tuesday and helps the pair stay bullish. New British Prime Minister Liz Truss promised on Monday to deal with the energy crisis and said that she will deliver a bold plan to cut taxes and grow the economy. Truss is expected to unveil her plan on Thursday. According to several news outlets, Truss is considering a lengthy freeze on energy bills for households and businesses.

Although it's difficult to say how such a measure would impact the Bank of England's policy outlook moving forward, the positive effect on the risk perception seems to be helping the British pound for now.

In the second half of the day, the ISM Services PMI data from the US will be looked upon for fresh impetus. Markets expect the Prices Paid component of the survey to increase to 76.5 in August from 72.3 in July. An unexpected decline in the inflation component could weigh on the greenback and open the door for an extended rebound in GBP/USD. Market participants will also keep a close eye on the performance of US stocks. If Wall Street's main indexes struggle to stage a convincing recovery, safe-haven flows could return to markets and limit the pair's upside.

GBP/USD Technical Analysis

The last three four-hour candles closed above the descending regression channel coming from early August and the 20-period SMA. Additionally, the Relative Strength Index rose to its highest level near 60 since the beginning of the latest downtrend, reflecting the bullish tilt. 

1.1600 (psychological level, static level) aligns as immediate resistance. In case the pair manages to hold above that level, the 1.1640/50 area (50-period SMA, static level) could be seen as the next hurdle ahead of 1.1700 (static level, psychological level).

On the downside, 1.1550 (20-period SMA) forms first support before 1.1500 (psychological level, upper limit of the descending channel) and 1.1440 (September 5 low).