• GBP/USD scaled higher for the third straight day and climbed to over a one-week high.
• Receding bets for more aggressive Fed rate hikes continued weighing on the greenback.
• Hawkish BoE expectations overshadowed mixed UK jobs data and remained supportive.

The GBP/USD pair gained traction for the third successive day on Tuesday and shot to a one-and-a-half-week high, around the 1.2040 region during the mid-European session. The momentum assisted spot prices to build on the recent recovery from the vicinity of mid-1.1700s, or the lowest level since March 2020 and was sponsored by broad-based US dollar weakness.

Investors continue scaling back their bet for a 100 bps Fed rate hike move later this month. Apart from this, the risk-on impulse dragged the safe-haven USD to its lowest level since July 6. The GBP bulls, meanwhile, seemed unaffected by the mixed UK jobs report, instead took cues from expectations for a further policy tightening by the Bank of England.

From a technical perspective, Tuesday's positive move validated the overnight breakout through a multi-week-old descending trend-channel resistance. The subsequent strength, however, struggled to find acceptance above the 100-period SMA on the 4-hour chart and stalled near the 50% Fibonacci retracement level of the 1.2332-1.1760 downfall.

The latter is pegged near the 1.2040-1.2045 region and should act as a pivotal point, which if cleared decisively would set the stage for a further near-term appreciating move. The GBP/USD pair might then aim to reclaim the 1.2100 mark, which coincides with the 61.8% Fibo. level, before eventually climbing to the 1.2155-1.2160 horizontal resistance.

On the flip side, the 38.2% Fibo. level, around the 1.1980 area, now seems to protect the immediate downside. Sustained weakness below might prompt some technical selling and accelerate the slide back towards the 1.1900 mark, or the 23.6% Fibo. level. Some follow-through selling would negate the near-term positive bias and make the GBP/USD pair vulnerable.

The next relevant support is pegged near the 1.1835-1.1830 region ahead of the 1.1800 round figure, below which the GBP/USD pair could aim to challenge the YTD low, around the 1.1760 region.

GBP/USD 4-hour chart

Key levels to watch