GBP/USD Forecast: Pound Sterling struggles to clear key 1.2650-1.2660 resistance

GBP/USD gathered bullish momentum and climbed above 1.2650 for the first time in a week on Tuesday. The pair lost its traction later in the day but didn't have a difficult time stabilizing above 1.2600. The near-term technical outlook doesn't yet point to a buildup of bullish momentum and buyers are likely to remain hesitant unless the pair clears 1.2650-1.2660 resistance.

While testifying before the UK Treasury Select Committee on Tuesday, Bank of England (BoE) Governor Andrew Bailey repeated that they are looking for a more sustained progress on reduction of more persistent elements of inflation. 

"Markets expect rate cuts this year, we do not endorse the market curve, but it is not unreasonable for the market to think that," Bailey added but refrained from offering any clues regarding the timing of the policy pivot. As a result, Pound Sterling gathered strength against its peers during the European trading hours on Tuesday.

Later in the day, the Federal Reserve will publish the minutes of the January policy meeting. The impressive January jobs report and hot inflation data, which caused the probability of a rate cut in May to decline sharply, were released after that meeting. Hence, the publication is unlikely to provide any fresh insights into the Fed's rate outlook.

In the meantime, the UK's FTSE 100 Index opened deep in negative territory on Wednesday, reflecting a risk-averse market environment. Moreover, US stock index futures stretch lower during the European trading hours. In case the market mood continues to sour later in the day, GBP/USD could come under renewed bearish pressure.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart retreated to 50 after rising toward 60 on Tuesday. After closing the last 2 4-hour candles above the 100-period Simple Moving Average (SMA), currently located at 1.2620, GBP/USD declined below this level, highlighting a loss of bullish momentum.

On the downside, 1.2600 (psychological level, static level, 50-period SMA) aligns as first support before 1.2580 (static level) and 1.2540 (static level).

Key resistance is located at 1.2650-1.2660 (Fibonacci 23.6% retracement of the latest uptrend, 200-period SMA). If the pair clears that hurdle, it could target 1.2700 (psychological level, static level) next.