GBPUSD rallied past its short-term descending trend line to suggest that a reversal is in order, following a pullback to the area of interest. The Fibonacci retracement tool shows levels where buyers might be looking to hop in.

Price is already testing the 50% Fib near the 100 SMA dynamic inflection point and the 1.2650 minor psychological mark. A larger correction could reach the 61.8% Fib that coincides with the 200 SMA dynamic support.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that support is more likely to hold than to break. In that case, GBPUSD could soon make its way back up to the swing high near the 1.2800 major psychological level or higher.

Stochastic is already on the move up to confirm that bullish momentum is picking up and could allow the uptrend to gain traction. RSI is also heading higher, so price could follow suit while buyers have the upper hand.

GBPUSD could take cues from the UK CPI report due later in the week, as this could set the tone for the next BOE decisions. Keep in mind that policymakers voted to keep interest rates unchanged in a 3-6 vote, which turned out to be more hawkish than the estimated 2-7 MPC vote.

Headline CPI is slated to slow from 4.6% to 4.3% on a year-over-year basis, underscoring the central bank’s decision to stand pat. A smaller dip in price pressures could revive expectations of interest rate hikes while a steeper drop might start talks on potential cuts, which might be bearish for the pound.

Meanwhile, the US dollar could hold out for the release of the US core PCE price index on Friday, as this could also highlight the Fed’s projection of interest rate cuts for next year.