GBP/USD Forecast: Pound on track to challenge 1.3100

Although GBP/USD has been struggling to build on Wednesday's gains, the bullish bias stays intact in the near term with the pair holding above the key 1.3050 level. The next recovery target for the pound aligns at 1.3100.

The heavy selling pressure surrounding the greenback triggered a decisive rebound in GBP/USD on Wednesday. The dollar remains on the back foot early Thursday but the sharp upsurge witnessed in EUR/GBP suggests that the euro is the main beneficiary of the capital outflows out of the dollar. 

At the time of press, the US Dollar Index was down 0.45% on the day and EUR/GBP was trading at its highest level in a week, rising 0.7%.

Several European Central Bank (ECB) policymakers adopted a hawkish tone in the last couple of days and pointed to July as the possible timing of the first ECB rate hike, triggering a broad-based euro rally.

In the second half of the day, Bank of England Governor Andrew Bailey and FOMC Chairman Jerome Powell will be delivering speeches.

It's worth noting that the Fed's aggressive policy tightening stance is already priced in with the CME Group FedWatch Tool pointing to a probability of only 2.2% of the Fed raising the policy rate by less than 100 basis points in the next two meetings. Hence, a hawkish tilt in Bailey's tone could help the pound gather strength against the dollar.

In the meantime, the US economic docket will feature the weekly Initial Jobless Claims and the Philadelphia Fed's Manufacturing Survey on Thursday. It would be surprising, however, to see a significant market reaction to these data.

GBP/USD Technical Analysis

GBP/USD trades slightly above the 100-period SMA on the four-hour chart and the Relative Strength Index (RSI) indicator holds at 60, confirming the bullish bias. On the upside, 1.3100 (200-period SMA, psychological level) aligns as the next resistance. In case this level turns into support, additional gains toward 1.3130 (static level) could be witnessed.

On the flip side, a daily close below 1.3050 (static level) could cause buyers to move to the sidelines. In that case, 1.3020 (20-period SMA) and 1.3000 (psychological level) could be seen as next support levels.