GBP/USD Forecast: Pound Sterling recovery stalls as key resistance holds

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• GBP/USD has been struggling to gather recovery momentum.
• 1.2070 aligns as key resistance level for the pair in the short term.
• Wall Street's main indexes look to open flat ahead of key inflation data.

After having snapped a three-day winning streak on Friday, GBP/USD has started the new week in a calm manner and found it difficult to make a decisive move in either direction. As the pair trades in a tight channel above 1.2000 early Monday, the technical outlook points to a lack of recovery momentum.

The US Dollar benefited from the risk-averse market environment ahead of the weekend. On Friday, the University of Michigan's Consumer Sentiment Survey for early February revealed that the one-year inflation expectation rose to 4.2% from 3.9% in January. Ahead of the US Bureau of Labor Statistics Consumer Price Index (CPI) report, which will be published on Tuesday, this data allowed the currency to end the week on a firm footing.

The Observer reported over the weekend a secret cross-party summit has been held to discuss the Brexit-related issues. The discussion was reportedly titled "How can we make Brexit work better with our neighbours in Europe?" and the introductory statement noted that that Brexit was acting as a drag on the UK's growth and limiting the economy's potential. This development, however, hasn't triggered a market reaction with the UK's FTSE 100 Index trading modestly higher on the day.

Meanwhile, US stock index futures are virtually unchanged on the day after having edged lower during the Asian trading hours. The US economic docket will not be featuring any high-impact data releases on Monday and the risk perception in the second half of the day could provide a directional clue to GBP/USD. In case Wall Street's main indexes gain traction after the opening bell, the US could find it difficult to gather strength and vice versa.

On Tuesday, ahead of the US inflation report, the December jobs report from the UK will be watched closely by market participants.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the four-hour chart stays below 50, highlighting the lack of buyer interest in the near term.

GBP/USD faces strong resistance at 1.2070, where the Fibonacci 61.8% retracement of the latest uptrend is located. If the pair manages to clear that level, it could extend its recovery toward 1.2125 (50-period Simple Moving Average (SMA)) and 1.2150 (Fibonacci 50% retracement).

On the downside,  1.2000 (static level, psychological level) acts as initial support before 1.1950 (multi-week low, static level).