**GBP/USD Extends Two-Day Bullish Recovery as 1.34 Holds**
*By Ross J. Burland, FXStreet – Original analysis and reporting*
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The GBP/USD currency pair has continued its upward momentum, extending a two-day bullish recovery while holding above the significant psychological level of 1.34. The recent strength in the pound comes after a period of heightened volatility driven by global risk sentiment, market reactions to both UK and US economic data, and underlying monetary policy expectations from major central banks.
This article provides an in-depth analysis of the current factors moving GBP/USD, technical outlook, and the broader context influencing its price action. The aim is to give forex traders and market participants a comprehensive update based on the latest information.
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### Recent Price Action
– GBP/USD opened the latest session on solid footing, leveraging gains seen in the previous trading day.
– After consolidating around the 1.3400 level, sterling found renewed buying interest, supported by improved sentiment around UK assets and signs of dollar softness.
– The pair pushed through minor resistance zones and hovered near recent highs, achieving an extension of its bullish reversal from local lows set earlier in the week.
#### Driving Forces Behind the GBP/USD Recovery
1. **Risk Sentiment Return**
– Global markets have shown signs of stabilization, with investors tentatively stepping back into risk assets.
– The easing of concerns surrounding new virus variants and global central bank policy missteps has encouraged a modest rebound across equities and high-beta currencies.
2. **US Dollar Weakness**
– The US dollar index (DXY) has traded off its recent highs, providing broader support to the pound and other major peers.
– Data releases from the US have tempered expectations for an aggressive Federal Reserve policy tightening cycle, reducing the yield advantage previously enjoyed by the dollar.
3. **UK Data Surprises**
– Recent data out of the United Kingdom has shown resilience in key sectors, particularly in employment and retail spending, offsetting worries about persistently high inflation.
– Stronger-than-expected earnings and job figures reinforced the narrative that the UK economy remains robust despite external pressures.
4. **Bank of England Policy Outlook**
– Markets anticipate that the Bank of England (BoE) will maintain a slightly more hawkish tone relative to its major peers, especially given ongoing inflation risks.
– Expectations of policy tightening have lent the pound ongoing support, even amid short-term volatility.
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### Technical Analysis for GBP/USD
A review of the daily chart provides several insights into the pair’s current technical picture:
– **Support at 1.34 Holds Firm**
– The 1.3400 region has emerged as a sturdy support zone for GBP/USD.
– Dips below this level have been consistently bought, as seen in the last two trading sessions.
– **Short-Term Trend Reversal**
– The pair carved out a double-bottom pattern on the intraday charts, marking a temporary floor near the 1.3360–1.3380 area.
– Momentum indicators such as RSI have shifted away from oversold territory, signaling the potential for further gains.
– **Resistance Levels**
– Immediate resistance is observed near the 1.3450–1.3470 region. A clear break above could open the door to a run towards 1.3500 and higher.
– **Moving Averages**
– GBP/USD has reclaimed its 20-period moving average on four-hour charts, a short-term bullish sign.
– However, the medium-term downtrend remains intact unless the pair can post a daily close above the 50-day average.
**Key Technical Levels**
– Major support: 1.3380, 1.3300
– Immediate resistance: 1.3475, 1.3500
– Further upside targets: 1.3550, 1.3600
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### Broader Market Context
The rebound in GBP
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