**GBP/USD Extends into a Two-Day Bullish Recovery as 1.34 Holds**
*By FXStreet Team; original article credits to FXStreet*
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The GBP/USD currency pair has resumed its bullish trajectory, extending into a two-day rally after successfully defending the notable 1.34 support level. Forex traders and analysts are closely monitoring the pair’s movement, as persistent buying above this psychological threshold reflects renewed optimism in the British Pound against the US Dollar.
This in-depth article dissects the key drivers behind the GBP/USD recovery, analyzes current technical setups, reviews fundamental catalysts, and outlines potential scenarios for the coming sessions.
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**I. Background: Context to the Recovery**
The cable, as GBP/USD is commonly known in the forex market, registered a robust recovery in recent trading sessions. After enduring a period of downward pressure driven by uncertainty over Brexit dynamics, shifting Bank of England rates projections, and resurgent US Dollar strength, the pair found a strong support base around the 1.34 handle. This threshold has now become the foundation for the pair’s upswing.
**Key Background Developments:**
– The Pound had recently dipped below 1.3400, testing fresh multi-week lows amid risk aversion and a US Dollar rally.
– Concerns regarding UK economic recovery, COVID-19 variants, and dovish BOE expectations contributed to the selloff.
– However, the area near 1.34 attracted strong buying interest, suggesting that market participants see value at this level.
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**II. Technical Analysis: GBP/USD Bulls Take the Stage**
The primary technical story around GBP/USD remains the defense and subsequent bounce from 1.34. Technical traders are now scrutinizing the price chart for further clues on sustainability and possible extension targets.
*Support and Resistance Levels*
– **Major Support:** 1.3400 has proved to be a solid floor. A sustained move above this level invites further bullish attempts.
– **Initial Resistance:** The 1.3500 round number serves as an immediate upward barrier. This level also coincides with historical price congestion.
– **Secondary Resistance:** 1.3550 to 1.3575, an area that capped GBP/USD rallies in earlier trading weeks.
*Moving Averages and Oscillators*
– On the daily chart, GBP/USD remains below the 50-day and 200-day simple moving averages, signaling the broader bias is not yet bullish.
– However, momentum oscillators such as the Relative Strength Index (RSI) and Stochastic have turned northward, reflecting the current bullish rebound.
*Chart Patterns*
– A potential double bottom formation is shaping up around 1.34, amplifying the case for a technical recovery.
– The pair must clear 1.3500, though, to confirm a more sustained reversal.
*Short-Term Trading Setup*
– As long as 1.34 remains intact on closing bases, intraday dips may be seen as buying opportunities.
– A close below 1.34 would invalidate the immediate bullish outlook and open up further downside toward 1.3300.
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**III. Fundamental Drivers Propelling the Pound**
Multiple fundamental factors are contributing to the recent upswing in the GBP/USD, with both UK and US economic developments in sharp focus.
*A. Sterling-Specific Catalysts*
– **Ongoing Economic Recovery:** Recent UK economic indicators, such as better-than-expected GDP numbers and upbeat service sector performances, have lent support to Sterling.
– **Labor Market Strength:** The UK unemployment rate has fallen, and wage growth is persistent, which may give the Bank of England more confidence to proceed with policy normalization.
– **BOE Policy Outlook:** Forward guidance from BOE officials has been less dovish than in previous months, with hints that rate hikes could come sooner in response to inflationary pressures.
*B. Dollar-Wide Factors*
– **US Dollar Pullback:** After a strong run higher, the US Dollar Index has shown
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