- GBP/USD has gone into a consolidation phase after declining toward 1.3300.
- BoE's Tenreyro sees the BoE opting out for a "modest tightening of policy."
- Additional recovery gains could be witnessed if GBP/USD overcomes 1.3380.
GBP/USD has failed to shake off the bearish pressure and fell toward 1.3300 on Wednesday. Although the pair is posting small daily gains on Thursday, it faces a couple of technical resistance levels that could limit the recovery in the near term.
The broad-based dollar strength on rising US Treasury bond yields forced GBP/USD to stay on the back foot mid-week. After the US data showed that the annual Core Personal Consumption Expenditures (PCE) Price Index rose to 4.1% in October, the CME Group FedWatch Tool's probability of the Fed leaving the policy rate unchanged by June 2022 fell below 20%.
Meanwhile, Bank of England Monetary (BoE) Policy Committee (MPC) member Silvana Tenreyro noted that she would not want to say specifically if the BoE would make its first rate hike in either December or February, further weighing on GBP.
With markets turning quiet amid the Thanksgiving holiday in the US, GBP/USD could look to extend its technical correction. BoE Governor Andrew Bailey will be delivering a speech later in the day but he is unlikely to clarify whether they will take policy action in December.
On a positive note, Ireland reportedly sees a "window of opportunity" to reach an agreement on Brexit's Northern Ireland protocol. Investors are not expecting to see a solution before the end of the year but inspiring Brexit headlines could help the British pound continue to erase its losses.
GBP/USD Technical Analysis
At the time of publication, GBP/USD was testing the descending trend line coming from November 18. In case a four-hour candle closes above that line, the 20-hour period SMA aligns as next resistance at 1.3380. Since the beginning of the week, the pair has been trading below that level and a convincing break above it could attract buyers and open the door for a more decisive recovery toward 1.3400 (psychological level) and 1.3430 (50-period SMA).
The Relative Strength Index (RSI) indicator continues to move sideways near 40, suggesting that sellers are staying on the sidelines for the time being.
On the downside, supports are located at 1.3320 (static level) and 1.3300 (psychological level).
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