Pulling back below 1.3220, preparing for a pullback

• GBP/USD is struggling to maintain its uptrend above the year-to-date (YTD) high of 1.3266.
• Overbought RSI move opened the door for GBP/USD pullback.
• The uptrend will resume once the pair recovers 1.3266.
• Downside risks arise if GBP/USD falls below 1.3200.

Sterling is retreating from multi-year highs hit on Tuesday and is down more than 0.40% against the greenback as traders prepare for the release of US inflation data on Friday. GBP/USD enjoyed a ride to a two-year high of 1.3266 following Fed Chairman Jerome Powell’s speech, however, at the time of writing, the pair is trading at 1.3220.

GBP/USD Price: Technical Insights

According to the GBP/USD daily chart, the uptrend will extend as long as the pair remains above the top line of an ascending channel that was broken on August 23. However, due to the 400 pip rally in August, the pair is set. to consolidate as buying momentum begins to fade, as depicted by the Relative Strength Index (RSI).

The RSI has turned overbought, meaning the pair could pull back before targeting higher prices.

If GBP/USD clears the YTD high of 1.3266, that could pave the way for a challenge to the March 23, 2022 peak at 1.3298. Further gains are seen once this level is cleared, with the next key resistance being the 1.3400 figure before challenging the March 1, 2022 high at 1.3437.

Conversely, should GBP/USD break below 1.3200, this could exacerbate a pullback towards the last cycle high of 1.3044 reached on 17 July. A breach of the latter will expose the 50-day moving average (DMA) at 1.2857.

GBP/USD Price Action – Daily Chart