The GBP/USD pair extended last week's strong recovery move from two-month lows and traded with positive bias for the fifth consecutive session on Monday. Currently placed near mid-1.2700s, the major started the week on a strong footing as investors now look forward to a slew of influential central bank speakers through the course of this week.
Meanwhile, the greenback remained on the back foot in wake of cautious comments by St. Louis Fed President James Bullard, noting that the Federal Reserve should refrain from raising interest rates further and wait to see how the economy is progressing. Against the backdrop of the recent surprise slowdown in inflation, investors will be closely scrutinize the Fed Chair Janet Yellen's remarks on Tuesday for fresh indications over the timing of next rate hike move and the central bank's plans to trim the Fed’s balance sheet.
Also in focus would be Tuesday's release of BOE Financial Stability Report, and subsequent press conference addressed by BOE Governor Mark Carney. Apart from central banks, final GDP growth figures from the US (Thursday) and the UK (Friday) would also play an important role in driving sentiment around the Major. In the meantime, the release of durable goods orders from the US would be looked upon for some impetus during early NA session at the start of a new week.
Despite of the pair’s recovery from sub-1.2600 level, short-term technical indicators remains in bearish territory and hence, the up-move runs the risk facing some fresh supply at higher levels. From current levels, 1.2775-85 region, marking 38.2% Fibonacci retracement level of 1.2365-1.3048 up-move is likely to act as immediate strong resistance. A convincing break through the said resistance might now trigger a short-covering move beyond the 1.2800 handle towards its next horizontal resistance near 1.2815 level and the momentum could further get extended towards mid-1.2800s en-route 23.6% Fibonacci retracement level resistance near 1.2885 region.
On the flip side, retracement back below 1.2720 level, leading to a subsequent drop below the 1.2700 mark, would reinforce the bearish bias and turn the pair vulnerable to head back towards testing 1.2635-25 confluence support, comprising of 61.8% Fibonacci retracement level and 100-day SMA.
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