GBP/USD, steady above 1.2020, approaches session highs at 1.2055

• The Pound bounces up from 1.2020 and approaches 1.2055 session highs.
• The pair remains practically flat in a quiet trading session.
• GBP/USD needs to regain 2.2450 to confirm its longer-term uptrend – SocGen.

Sterling’s reversal from the intra-day high of 1.2055 seen on the early European session opening has been supported near 1.2020, and the pair picked up again to reach the 1.2040 area so far.

On a wider perspective, the GBP/USD remains practically unchanged on the daily chart, hovering within the lower range of the 1.20s after the reversal from six-month highs at 1.2450 seen last week.

The Pound, looking for direction on a thin trading session

The pair lost momentum earlier this month after the Bank of England slowed down the monetary tightening pace after its December meeting. The bank hiked rates by 50 basis points, with two of the nine committee members voting to leave rates unchanged.

The BoE’s decision has triggered speculation of an easier monetary tightening in 2023 and suggests that interest rates might peak at a lower level than previously estimated. Some market sources anticipate a Bank Rate peak at 4% next year instead of the previously expected 6%.

Forex markets remain practically flat on a post-Christmas week, with stock markets posting moderate advances, buoyed by the Chinese Authorities’ announcement of the end of the restrictions for inbound travelers, which is expected to trigger a sharp economic recovery in the Asian country.

GBP/USD needs to regain 1.2450 to confirm the longer-term uptrend – SocGen

From a technical point of view, analysts at Société Générale see 1.2450 resistance as a crucial element to confirm the larger-term uptrend: “Recent peak at 1.2450 is expected to be an intermittent resistance. Failure to cross above this hurdle can result in a phase of pullback (…) Recent pivot low of 1.1900 is near-term support. A break can lead to a deeper pullback towards the October high of 1.1640.”

Technical levels to watch