GBP/USD holds onto weekly gains, near 1.2500

• Dollar ends a positive weekly streak across the board, even as risk aversion prevails.
• Pound offers signs of life, rebounds more than 200 pips.
• GBP/USD could correct further, considering magnitude of recent slide.

The GBP/USD is moving sideways on Friday, consolidating slightly below 1.2500. The pair remained steady even as stocks in Wall Street turned negative. Risk aversion is offering no boost to the dollar.

The pound is rising versus the US dollar for the first time in five weeks as it recovers from the lowest level in almost two years and following a 900 pips slide. The main trend is still bearish for GBP/USD. The pair moved off YTD lows giving signs of an interim bottom. The recovery appears to have room to go, particularly is financial tensions across global markets ease.

Technical outlook

The GBP/USD pair tested the 1.2540 resistance, where the Fibonacci 23.6% retracement of the downtrend that started in late March is located, before going into a consolidation phase on Friday, noted Dwani Mehta, analysts at FXStreet. “On a bullish note, the pair managed to close above the 21 DMA for the first time since March 22 and the Relative Strength Index (RSI) indicator on the daily chart rose to 50.”

According to Mehta, in case 1.2450 holds as support in the near term, GBP/USD could test 1.2540 and eye 1.2630 as its next bullish target. “A daily close above the latter could attract buyers and open the door for additional gains toward 1.2750 (Fibonacci 38.2% retracement).”

Technical levels