GBP/USD set to test 1.3945 on USD weakness?

• Benefits from USD weakness, retreat in T-yields.
• Brexit concerns, UK retail sales cap gains.

The GBP/USD pair remains well bid so for this Wednesday, now consolidating the brief spike to 1.3911 highs, as the bulls gather pace for a test of multi-month tops of 1.3945.

GBP/USD regains 5-DMA and beyond

Cable keeps its bullish momentum intact near the 1.39 handle, as sentiment remains underpinned by the US political worries induced sell-off in the US dollar across the board while a retreat in Treasury yields from more-than three-year peaks of 2.672% also lifted the demand for the GBP as an alternative higher-yielding asset.

Moreover, the pound also derives support from the latest UK Government’s legal response to the challenge filed by a group of anti-Brexit Scottish lawmakers, which shows Britain’s commitment to leave the EU.

However, it remains to be seen if the spot can extend gains towards the midpoint of the 1.39 handle, as a big disappointment on the UK retail sales numbers combined with nervousness ahead of the UK jobs report could cap further upside.

Meanwhile, “there aren't any major market-moving economic releases due today but this week's key releases - UK jobs report, along with the first GDP estimates from the US and UK would play an important role in determining the pair's next leg of directional move”, FXStreet’s Analyst, Haresh Menghani, notes.

GBP/USD Technical Levels

Menghani, adds: “Technical indicators continue to suggest near-term overbought conditions and hence, a modest retracement from current levels remains a distinct possibility. Immediate downside remains protected at 1.3835 resistance break-point, now turned support, below which the pair could correct back towards the 1.3800 handle en-route 1.3730-25 support, marked by 23.6% Fibonacci retracement level of 1.3039-1.3945 up-move. On the flip side, any momentum beyond the 1.3900 handle might continue to confront fresh supply near the 1.3940-45 region, which if cleared sets the stage for a continuation of the pair's bullish trajectory towards reclaiming the key 1.40 psychological mark.”