GBP/USD Price Analysis: Trades with modest intraday gains below 1.3100, bullish bias remains

The GBP/USD pair attracts some dip-buying during the Asian session on Tuesday and for now, seems to have stalled a two-day-old corrective slide from its highest level since April 2022, around the 1.3140 region touched last week. Spot prices, however, struggle to capitalize on the move and retreat a few pips from the vicinity of the 1.3100 mark, or a fresh daily peak touched in the last hour.

Bets that the Federal Reserve (Fed) will soften its hawkish tone and keep interest rates steady after the widely anticipated 25 bps lift-off in July continues to act as a headwind for the US Dollar (USD). Apart from this, a positive risk tone is seen as another factor undermining the safe-haven Greenback, which, in turn, assists the GBP/USD pair to regain positive traction. That said, speculations that the US central bank could stick to its forecast for a 50 bps rate hike this year hold back traders from placing fresh bearish bets around the USD and keep a lid on any meaningful upside for the major.

The downside for the GBP/USD pair, however, remains cushioned in the wake of firming expectations that the Bank of England (BoE) will be far more aggressive in tightening its monetary policy to curb stubbornly high inflation. Hence, the market focus will remain glued to the latest consumer inflation figures from the UK, due for release on Wednesday. The crucial CPI report should influence the British Pound (GBP) and provide some meaningful impetus to the major. In the meantime, the US monthly Retail Sales data will be looked upon for short-term trading opportunities on Tuesday.

From a technical perspective, last week's sustained breakout through a resistance marked by the top end of a nearly one-month-old ascending channel was seen as a fresh trigger for bullish traders. That said, the Relative Strength Index (RSI) on the daily chart is flashing slightly overbought conditions and capping gains for the GBP/USD pair. Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for spot prices is to the upside. This, in turn, suggests that any meaningful pullback might still be seen as a buying opportunity.

The overnight low, around the 1.3050 area, now seems to act as immediate support. This is followed by the 1.3000 psychological mark, which if broken decisively could prompt some technical selling. The GBP/USD pair might then accelerate the slide towards the next relevant support near the 1.2930 horizontal zone, though any subsequent fall is more likely to get bought into near the 1.2900 round figure. This should help limit any further losses for spot prices near the 1.2850 horizontal resistance breakpoint. The latter should act as a strong base for the major and a key pivotal point for short-term traders.

On the flip side, bulls might now wait for a sustained strength back above the 1.3100 mark before positioning for any meaningful intraday appreciating move. The momentum might then lift the GBP/USD pair back towards the 1.3140 region, or the multi-month peak. Some follow-through buying should pave the way for a move towards reclaiming the 1.3200 mark. The upward trajectory could get extended towards the 1.3250-1.3260 intermediate hurdle, above which spot prices seem poised to climb further towards the 1.3300 mark.

GBP/USD daily chart

Key levels to watch