After the strong UK consumer inflation figures published on Wednesday, the GBP/USD pair receives fresh bids, and buying interest picks up during the first half of the European session. In response to the strong momentum, spot prices are now heading to a new high since February 02, with bulls awaiting a sustained rally above the 1.2300 mark before attempting to position themselves for further appreciating gains.
It is likely that the Bank of England (BoE) will be forced to raise interest rates by 25 basis points at least by Thursday after the UK CPI print is hotter than expected, which in turn will boost the British Pound. The US Dollar (USD), on the other hand, drops to a fresh multi-week low amid expectations for a less hawkish Fed and further pushes the GBP/USD pair higher ahead of the key central bank event risks.
It was evident that on Wednesday, there was new buying, which validated this week's breakout through the 1.2200 mark, which is the 61.8% Fibonacci retracement level for the January-March downfall. It is expected that some follow-up buying after the 1.2300 level is seen as a fresh trigger for bulls due to the fact that positive oscillators on the daily chart are still very far from being in the overbought zone.
Upon reaching the next relevant hurdle near 1.2320, the GBP/USD pair might climb to ultimately reach the 1.2400 round-figure level. There is a possibility that the momentum could be extended further to the double-top resistance near the 1.2450 regions, or the YTD high reached in January, after which bulls may attempt to regain the psychological level of 1.2500 for the first time since June 2022, or the YTD peak reached in January.
However, on the other hand, the area around 1.2235 seems to be providing a strong barrier for immediate downside before it reaches the 1.2200 mark (61.8% Fibo.) and the overnight swing low, around 1.2180-1.2175. It may be necessary for the GBP/USD pair to undergo some technical selling if a convincing break below occurs, which will lead to a potential move towards the 1.2125 confluence, which comprises the 50% Fibo. level and the 200-day Exponential Moving Average (SMA).
As a result, the GBP/USD pair could act as a strong base, which, if broken decisively, could lead to a shift in the near-term bias to bearish traders and create a setting for further losses for the pair. The subsequent downward trend could drag spot prices further towards the 38.2% Fibo level, located around the 1.2050-1.2045 region, and on its way toward the psychological level and the 23.6% Fibo level, located between 1.1955 and 1.1950.
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