GBP/USD: a bullish bias persists towards 1.2570?

GBP/USD is currently trading at 1.2383 with a high of 1.2400 and low of 1.2377.

Debate within the FOMC about balance sheet normalization is underway - GS

GBP/USD is steady in a slow start to the week for the FX space suffering from an FOMC hangover still from last week's dovish hike and a slightly more hawkish sounding BoE that followed. Apart from Forbes’ dissent in favour of a hike (even though she’s leaving soon), there were some hawkish comments in the minutes. 

However, The Bank of England has warned that there is only so much inflation that it is prepared to look through, but the tone of BoE Carney has remained dovish in recent months, as explained by analysts at Rabobank:

"The MPC has specified that “attempting to offset fully the effect of weaker sterling on inflation would be achievable only at the cost of higher unemployment and, in all likelihood, even weaker income growth”. For this reason, the money market is priced for steady BoE policy well into next year and we see risk of steady rates potentially into 2019."

Meanwhile, the price action since showed that sterling recovered smartly off the 1.21 area tested at the start of the week and finished the week near 1.24, which is the 50% retracement of its decline since February 2, as noted by analysts at Brown Brothers Harriman who offered the following analyses:

GBP/USD levels

"A move above there," 1.2400, "...would test the down trendline drawn off that February high and the high late in the month (~$1.2570). The 61.8% retracement is near $1.2480. The technical indicators warn against picking a top."

Valeria Bednarik, chief analyst at FXStreet explained that in the 4 hours chart, technical indicators have lost upward strength but hold within overbought territory, whilst the 20 SMA present a sharp bullish slope, also standing in the 1.2290 region. "In this last time frame, the price has settled above its 200 EMA for the first time this March, adding to the bullish case. The immediate resistance is now 1.2425, the 38.2% retracement of the January rally, while a critical support comes at 1.2345, the 50% retracement of the same rally and February's low."