GBP/USD is trading in the green for the first time in six trading days, as bears appear to be exhausted after a tumultuous week. Cable is showing signs of life, aided by the return of risk appetite following upbeat Chinese activity data and as nervousness eases ahead of the Fed’s expected 75 basis point rate hike.

As a result, the GBP/USD currency pair extends its recovery towards 1.2050, having gained 0.35 percent on the day as of writing. As a result, the bullish market sentiment has dampened the ongoing rally in the safe-haven US dollar.

Furthermore, investors reposition themselves ahead of critical Fed and BOE monetary policy decisions. The BOE is widely expected to raise interest rates by 25 basis points to 1.25 percent this Thursday, but the debate over the central bank’s rate hike path will be critical for GBP bulls to sustain the recovery.

GBP/USD Technical Outlook

Looking at the daily cable chart, a rebound appears to have some credence because the price has already reached the measured target of the rising channel breakdown at 1.1964.

On Wednesday, the spot fell to its lowest level since January 2020, at 1.1933, after a double whammy of aggressive Fed rate hike expectations and deepening concerns about the UK economy’s future.

The Relative Strength Index (RSI) has recovered from oversold territory, trading at 30.71, supporting the renewed rise in GBP/USD. Regaining the psychological level of 1.2050 is critical to igniting the additional recovery towards 1.2100, above which doors will open once more towards 1.2200. Consider looking for a buy trade above 1.2000 with a target of 1.2207.

Good luck!