GBP/USD Forecast: Stage seems set for a move towards 1.3200 mark

The British pound rallied across the board on Wednesday and pushed the GBP/USD pair to two-week tops, around mid-1.3100s. Record improvement in the gauge of optimism in the manufacturing sector was seen as a key trigger for the pair's sharp appreciating move of around 120 pips. According to the CBI survey, the Quarterly Business Situation Index jumped sharply to +23 in January from -44 in October. This marked the stronger level since April 2014 and the 67 points quarterly swing was also the largest on record since 1958.

The data added to the latest optimism led by Tuesday's stronger-than-expected UK wage growth figures and forced investors to temper expectations for an imminent interest rate cut by the Bank of England at its upcoming meeting on January 30. Apart from this, possibilities of some short-term trading stops being triggered above the 1.3100 round-figure mark and a modest US dollar pullback further contributed to the pair's strong intraday upsurge to the highest level since January 8.

As investors digested the overnight positive move, the pair witnessed a modest pullback during the Asian session on Thursday. Bulls seemed rather unimpressed by the fact that the House of Lords finally approved the UK Prime Minister Boris Johnson’s Withdrawal Agreement Bill (WAB) without any change. In absence of any major market-moving economic releases, either from the UK or the US, any incoming Brexit-related headlines might influence the sentiment surrounding the major and produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the overnight positive move stalled near a resistance marked by 61.8% Fibonacci level of the 1.3285-1.2954 recent slide. However, the fact that the pair on Wednesday decisively broke through a three-week-old descending trend-channel, the near-term technical set-up might have already shifted in favour of bullish traders. Hence, any subsequent pullback towards 200-period SMA on the 4-hourly chart, around the 1.3100 round-figure mark, might still be seen as a buying opportunity and should help limit the downside near the 1.3080 region (38.2% Fibo. level).

On the flip side, sustained move beyond the previous session's swing high, around mid-1.3100s, has the potential to lift the pair back towards reclaiming the 1.3200 round-figure mark. The momentum could further get extended towards mid-1.3200s and late December/early January swing high resistance near the 1.3285 region.