• GBP/USD rallies for the second successive day and hits a one-week high on Thursday.
• Talks of a mini-budget U-turn by the UK government boost sterling and offers support.
• The stronger US CPI-inspired broad-based rally caps the pair near the 1.1300 mark.

The GBP/USD pair gains strong positive traction for the second straight day on Thursday and builds on the previous day's goodish rebound from a nearly two-week low. The momentum lifts spot prices to a one-week high, though falter near the 1.1300 mark following the release of hotter US consumer inflation figures.

The British pound gets a strong lift amid talks that the new UK government could reverse its vast tax cuts announced in the mini-budget in September. The intraday positive move, however, runs out of steam amid a strong pickup in the US dollar demand, bolstered by a stronger US CPI report and hawkish Fed expectations.

From a technical perspective, the GBP/USD pair found decent support on Wednesday near the 50% Fibonacci retracement level of the recent strong recovery from an all-time low. A subsequent move beyond the 100-period SMA on the 4-hour chart prompts some technical selling and contributes to the strong intraday move up.

Bulls, however, face rejection near the 200-hour SMA, which is currently pegged near the 1.1300 round figure and should act as a pivotal point. Meanwhile, technical indicators on the daily chart - though have been recovering from the negative territory - are yet to gain any meaningful traction and warrant caution for bulls.

Hence, it will be prudent to wait for a sustained strength beyond the 1.1300 mark before traders start positioning for any further appreciating move. The GBP/USD pair might then accelerate the momentum towards the next relevant hurdle near the 1.1370 region before aiming to reclaim the 1.1400 round-figure mark.

On the flip side, the 1.1120-1.1115 horizontal zone now seems to protect the immediate downside ahead of the 1.1100 level. Any further decline is likely to find decent support near the 1.1085 region (100-period SMA on the 4-hour chart), which is closely followed by the 38.2% Fibo. level, around the 1.1065-1.1060 zone.

A convincing break below the latter will suggests that the two-day-old uptrend has lost steam and shit the bias back in favour of bearish traders.

GBP/USD 4-hour chart

Key levels to watch