GBP/USD Forecast: Pound Sterling looks to break out of range on BOE commentary

GBP/USD has been struggling to make a decisive move in either direction and moving horizontally at around 1.2100 in the second half of the week. The near-term technical outlook fails to offer a clear directional bias and investors will pay close attention to comments from Bank of England (BOE) policymakers during the policy hearing at the UK Treasury Select Committee.

Following its decision to hike the policy rate by 50 basis points as expected last week, the BOE announced that it lowered its one-year inflation projection to 3.01% from 5.2% in November's forecast. Although BOE Governor Bailey noted that inflation risks were more skewed to the upside than any time in the Monetary Policy Committee's history, Pound Sterling has been struggling to find demand since the BOE event.

Bailey is likely to remind that they will need to continue to tighten the policy in case price pressures proved to me more persistent than anticipated. However, GBP/USD is likely to come under bearish pressure if Bailey notes that they are open to reevaluate the policy based on evolving inflation dynamics. If Bailey confirms another 50 bps rate hike at the next policy meeting, that would be seen as a hawkish sign and help the pair gather bullish momentum.

In the second half of the day, the US economic docket will feature the weekly Initial Jobless Claims data. Meanwhile, US stock index futures trade in positive territory early Thursday following the sharp decline witnessed in Wall Street's main indexes on Wednesday. 

In case US stocks stage a rebound following the opening bell, the risk-positive market environment could weigh on the US Dollar and allow GBP/USD to stretch higher and vice versa.

GBP/USD Technical Analysis

GBP/USD trades near the immediate resistance that seems to have formed at 1.2100. Once the pair rises above that level and confirms it as support, it could target 1.2140 (Fibonacci 50% retracement of the latest uptrend) and 1.2200 (Fibonacci 38.2% retracement, 200-period Simple Moving Average (SMA)).

On the downside, 1.2070 (Fibonacci 61.8% retracement) aligns as first support before 1.2050 (20-period SMA) and 1.2000 (static level, psychological level).