GBP/USD rebounds from 50 DMA support, climbs back above mid-1.2200s ahead of US NFP

• GBP/USD stages a solid recovery from the 50 DMA support, a nearly three-week low set on Friday.
• Sliding US bond yields fails to assist the USD to capitalize on its bounce and lends some support.
• A dovish assessment of the BoE decision on Thursday could cap gains ahead of the US NFP data.

The GBP/USD pair finds decent support near the 50-day SMA and stages a goodish intraday recovery from the 1.2185-1.2180 region, or a nearly three-week low touched earlier this Friday. The momentum allows spot prices to recover a part of the previous day's Bank of England (BoE)-inspired losses and climb back above the 1.2250 level during the mid-European session.

It is worth recalling that the Uk central bank, in its policy statement, removed the phrase that they would "respond forcefully, as necessary" (to inflation). Furthermore, BoE Governor Andrew Bailey said that inflation will continue to fall this year and more rapidly during the second half of 2023. This, in turn, lifted expectations for a less aggressive policy tightening going forward and undermined the British Pound.

That said, the emergence of fresh US Dollar selling assists the GBP/USD pair to attract some buyers near a technically significant 50-day SMA support. In fact, the USD Index, which tracks the greenback against a basket of currencies, fails to capitalize on the overnight bounce from a nine-month low amid a modest downtick in the US Treasury bond yields. The USD downside, however, seems cushioned ahead of the key US macro data.

Friday's US economic docket highlights the release of the closely-watched US NFP report. An unexpected drop in the US Weekly Initial Jobless Claims pointed to the underlying strength in the labor market and might have lifted expectations for a positive surprise from the official employment details. This, along with a weaker tone around the equity markets, should limit losses for the safe-haven buck and cap the GBP/USD pair.

Technical levels to watch