GBP/USD Price Analysis: Pound Sterling defends 1.2000 as risk-off mood eases

• An ease in the risk aversion theme has led to a rebound in the Cable.
• The Pound Sterling has recovered to near the 20-EMA around 1.2038.
• The formation of a Descending Triangle pattern indicates a consolidation broadly.

The GBP/USD pair is displaying a confident recovery after dropping to near 1.2005 in the early Asian session. The Cable has extended its rebound move to near 1.2034 but is expected to remain volatile as the overall sentiment is still risk-averse.

The US Dollar Index (DXY) has witnessed a correction to near 104.35 as the festive mood is keeping the asset inside the woods on a broader note. Also, the 10-year US Treasury yields have witnessed a gradual selling pressure to near 3.87%.

On an hourly scale, the Cable is auctioning in a Descending Triangle chart pattern, which indicates a volatility contraction. The Pound Sterling has sensed buying interest after dropping to near the horizontal support of the aforementioned chart pattern placed from December 22 low at 1.1992. While the downward-sloping trendline is plotted from December 19 high at 1.2242.

Cable has also challenged the 20-period Exponential Moving Average (EMA) at around 1.2038, which indicates that the short-term trend is turning bullish.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates a consolidation head.

Should the Cable break above December 27 high at 1.2112, Pound Sterling bulls will drive the asset toward December 21 high at 1.2189 followed by December 19 high at 1.2242.

On the flip side, a decisive downside below December 22 low at 1.1992 will trigger a breakdown of the Descending Triangle and will drag the Cable toward November 29 low at 1.1940. A slippage below the latter will expose the Cable for more weakness toward November 30 low around 1.1900.

GBP/USD hourly chart