GBP/USD clings to gains near weekly high, bulls await sustained move beyond 1.1200 mark

The GBP/USD pair reverses an intraday dip to the 1.1070 area and climbs back closer to a one-week high touched earlier this Friday. The pair sticks to its positive bias for the fourth successive day, with bulls now awaiting a sustained move beyond the 1.1200 round-figure mark.

The Bank of England's intervention for the second day on Thursday restores stability in the UK debt market. Furthermore, an upward revision of the UK GDP print underpins the British pound and acts as a tailwind for the GBP/USD pair. The UK Office for National Statistics reported this Friday that the economy expanded by 0.2% during the second quarter against a modest 0.1% contraction estimated, easing recession fears.

The US dollar, on the other hand, languished near the weekly low and turns out to be another factor offering support to the GBP/USD pair. The spill-over effect of the UK central bank's move to calm the markets drags the benchmark 10-year US Treasury not away from a 12-year high touched earlier this week. Apart from this, a goodish recovery in the global risk sentiment is seen weighing on the safe-haven greenback.

With the latest leg up, the GBP/USD pair has now rallied over 850 pips from an all-time low set on Monday. It, however, remains to be seen if bulls can capitalize on the move amid worries that the new UK government's historic tax cuts could stretch Britain's finances to their limits. Furthermore, the fiscal package threatens to derail the BoE's efforts to contain inflation and create additional economic headwinds.

From a technical perspective the pair has rallied all the way back up to the long-term falling channel it has been rising and falling within, in a step decline all year. The lower boundary of the channel is located somewhere around the 1.1225 mark depending on exactly which troughs you use to trace it. It is likely to provide resistance to further efforts to drive up the price and may result in a pullback. It will require a daily close or open above the boundary and back inside the channel to confirm more upside. 

The GBP/USD pair remains on track to snap a two-week losing streak. Traders now look forward to the US Personal Consumption Expenditures (PCE) - the Fed's preferred inflation gauge. The US economic docket also features the release of the Chicago PMI and the revised Michigan Consumer Sentiment Index, which might influence the USD and provide some impetus to the GBP/USD pair later during the early North American session.

Technical levels to watch