GBP/USD climbs to three-day top, beyond mid-1.2100s on mostly upbeat UK jobs data

• GBP/USD scales higher for the second straight day and is supported by a combination of factors.
• The better-than-expected UK jobs data benefits the British Pound amid sustained  USD selling.
• The upside potential, however, seems limited ahead of the crucial US consumer inflation data.

The GBP/USD pair builds on the overnight strong intraday rally of over 100 pips from the 1.2030 region and gains traction for the second successive day on Tuesday. The pair gets an additional lift following the release of the upbeat UK jobs data and climbs to a three-day high, around the 1.2170 region during the early European session.

The UK Office for National Statistics Office for National Statistics reported that the number of people claiming unemployment-related benefits fell by 12.9K in January. Moreover, the previous month's reading was also revised down sharply to -3.2K as compared to the 19.7 rise estimated originally. This, to a larger extent, helps offset the mixed UK wage growth data and continues to underpin the British Pound.

The US Dollar, on the other hand, is seen extending the previous day's retracement slide from a multi-week high, which, in turn, is seen as another factor pushing the GBP/USD pair higher. That said, any subsequent move-up is more likely to remain capped. Traders might refrain from placing aggressive bets ahead of the crucial US consumer inflation figures, due for release later during the early North North American session.

The US CPI report will play a key role in influencing the Fed's rate-hike path, which, in turn, should drive the USD demand and provide a fresh directional impetus to the GBP/USD pair. In the meantime, expectations that the Bank of England (BoE) is nearing the end of its current policy-tightening cycle could hold back bulls from placing fresh bets around the Sterling. This might further contribute to capping gains for the major.

Nevertheless, the latest leg up pushes the GBP/USD pair back closer to the 50-day SMA resistance, which should continue to act as a strong barrier. That said, a convincing breakthrough might prompt some technical buying and pave the way for some meaningful appreciating move heading into the key US data risk.

Technical levels to watch