GBP/USD Price Analysis: Jumps to fresh weekly high, upside potential seems limited

• GBP/USD staged a solid recovery from sub-1.3000 levels amid broad-based USD weakness.
• The fundamental backdrop favours the USD bulls and should cap the upside for the major.
• Sustained strength beyond the 1.3100 is needed to support prospects for any further gains.

The GBP/USD pair gained strong positive traction on Wednesday and snapped a four-day losing streak back closer to the YTD low. The momentum extended through the mid-European session and pushed spot prices to a fresh weekly high, around the 1.3065 region in the last hour.

From a technical perspective, repeated failures to find acceptance below the 1.3000 psychological mark prompted some short-covering around the GBP/USD pair amid broad-based US dollar weakness. That said, any meaningful recovery seems elusive amid hawkish Fed expectations. The markets seem convinced that the US central bank would tighten its monetary policy at a faster pace to curb soaring inflation and have been pricing in multiple 50 bps rate hikes. This supports prospects for the emergence of some USD dip-buying, which should cap the GBP/USD pair.

Hence, any subsequent move up is more likely to confront stiff resistance and faltered near the 1.3100 confluence hurdle, comprising 200-period SMA on the 4-hour chart and a descending trend-line. The said handle should act as a pivotal point and help determine the near-term trajectory. A convincing breakthrough would suggest that the GBP/USD pair has formed strong base just below the 1.3000 mark and pave the way for additional gains. The next relevant hurdle is pegged near the 1.3145-1.3150 area, above which bulls might aim to reclaim the 1.3200 round figure.

On the flip side, the 1.3000-1.2990 area might continue to act as immediate support. Some follow-through selling below the YTD low, around the 1.2975-1.2970 region, would make the GBP/USD pair vulnerable to accelerate the slide towards testing the 1.2910-1.2900 support zone. The downward trajectory could further get extended towards the next relevant support near the mid-1.2800s before the GBP/USD pair eventually drops to the 1.2820 area.

GBP/USD 4-hour chart

Key levels to watch