- GBP/USD defends 1.2200 amid a broad US dollar pullback, positive mood.
- Cable’s rebound appears capped amid the UK-US macro divergence.
- GBP/USD jumps off falling wedge support on 4H but 21-SMA is the level to beat.
GBP/USD is moving back and forth in a 20-pips range in the European session, defending minor bids just above the 1.2200 level.
The recovery attempt in the pair could be attributed to a broad pullback in the US dollar vs. its main rivals from the highest level in two decades just shy of the 105.00 mark.
The positive shift in risk sentiment, in the wake of Shanghai reopening news, is boding ill for the safe-haven dollar. Although the further upside in cable remains elusive, thanks to the ongoing rally in the US Treasury yields across the curve.
The macroeconomic, as well as, the monetary policy divergence between the UK and the US economies will likely keep the pound undermined in the near term.
Attention now shifts towards the US Michigan Consumer Sentiment data and Fedspeak for fresh trading impetus. Next week, the focus will be on the US Retail Sales and the UK inflation data.
Looking at cable’s four-hour chart, the price staged a decent comeback after finding bids at 1.2165 on Thursday, which appeared to be the falling trendline (wedge) support.
Note that the major is traversing within a bullish wedge formation after the brief recovery on May 4 lost legs near the 1.2535 region.
The Relative Strength Index (RSI) has turned flat above the oversold region while below the midline, suggesting that the recovery momentum may be losing traction.
If the downside pressure accelerates, then a retest of the wedge support, now at 1.2136 will be challenged.
A breach of the latter will trigger a fresh drop towards the 1.2100.
GBP/USD: Four-hour chart
On the other side, any recovery attempts will need to recapture the immediate upside hurdle at 1.2250, above which the bearish 21-Simple Moving Average (SMA) at 1.2268 will be probed.
Further up, the falling trendline (wedge) resistance at 1.2309 will be the last line of defense for GBP sellers.
GBP/USD: Additional technical levels
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