GBP/USD reverses a dip below 1.2850 as USD buying stalls

The bears loosened grip somewhat on the GBP, allowing a tepid-bounce in GBP/USD back above 1.2850 levels.  

GBP/USD: 20-DMA (1.2892) back on sight

The major trims losses, but remains near six-day lows amid divergent monetary policy outlooks between the Fed and BOE, especially after yesterday’s dovish BOE decision, which suggested rate hike remains off the table this year.

The latest leg higher in cable can be mainly attributed to tumbling treasury yields, which led to stalled USD buying across the board, while weaker treasury yields also lifted demand for the GBP as an alternative higher-yielding currency.  

Looking ahead, the spot may remain confined with a narrow, with the upside likely to be capped by key resistance located if 20-DMA, as investors brace for next risk events lined up for release in the NA session – the US CPI and retail sales figures.

GBP/USD Forecast: turning mildly bearish post-BOE, US CPI and retail sales next

GBP/USD Levels to consider            

A break above 1.2900 (round figure) could lift the pair above1.2961 (May 9 high), beyond which a test of 1.2990 (7-week high) is imminent. Conversely, a break below 1.2876 (daily low), leading to a subsequent break below 1.2837/29 (classic S1/ Fib S2 & May 4 low) is likely to drag the pair towards testing its next support near 1.2800 (key support).