GBP/USD Awaits Further Conviction After Bouncing from Recent Lows

The GBP/USD pair continues to build on its prior day’s rebound, which saw a robust recovery of over 80 pips from the 1.2165-1.2160 support area. During the Asian session on Tuesday, the pair maintained its upward trajectory. Nevertheless, there is a notable absence of strong bullish momentum, signalling the need for cautious positioning before anticipating an extension of the recent recovery.

This rebound follows a recent dip to its lowest level since mid-March, touching around the 1.2035 region last week.

Several factors have contributed to the US Dollar’s (USD) decline to a one-and-a-half-week low, providing tailwinds for the GBP/USD pair. Friday’s relatively subdued US wage growth data alleviated concerns of inflation, potentially allowing the Federal Reserve (Fed) to adopt a less hawkish stance.

Additionally, a cautious tone from Fed officials regarding the necessity for further interest rate hikes has led to a further reduction in US Treasury bond yields.

Despite initial market reactions to military conflicts between Israel and the Palestinian group Hamas, which caused a brief market disturbance, sentiment shifted as Fed officials leaned towards a slightly dovish view. This was evident in the generally positive tone observed in equity markets, further undermining the appeal of the safe-haven US Dollar. Nevertheless, expectations that the Bank of England (BoE) will maintain its current policy in November are likely to limit the GBP/USD pair’s upside potential.

Notably, the BoE unexpectedly paused its rate-hiking cycle in September and offered few indications of its intent to raise rates. Consequently, it would be judicious to await strong follow-through buying before confirming the formation of a near-term bottom for the GBP/USD pair and considering substantial bullish positions. Looking ahead, there are no significant market-moving economic releases expected from either the UK or the US on Tuesday.

During the North American session, market participants will pay attention to speeches from influential FOMC members, with US bond yields and overall risk sentiment potentially influencing USD price dynamics. Traders should be poised to seize short-term opportunities with the GBP/USD pair.

However, the primary focus will remain on the forthcoming FOMC minutes, set for release on Wednesday, followed by US consumer inflation figures on Thursday. GBP/USD Technical AnalysisThe GBP/USD pair has leveraged its breakthrough of bearish channel resistance to stage a bullish rebound, resuming its expected correctional upward trajectory on an intraday basis. The next major target on the horizon is the 1.2297 level, with a potential extension of the bullish phase towards the 1.2460 region in the near term. It’s worth noting that a breach of the 1.2130 level could disrupt this anticipated ascent and redirect the pair back towards the primary bearish track.

The anticipated trading range for today falls between support at 1.2140 and resistance at 1.2300.