GBP/USD recovers to 1.2350 on renewed US Dollar weakness

GBP/USD trades in a tight range near 1.2350 on Wednesday as the US Dollar stays on the back foot amid a positive shift seen in risk sentiment. Investors keep a close eye on comments from US President Donald Trump on trade policies. 

The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 60, reflecting the bullish stance. On the upside, 1.2370 (20-day Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest downtrend) aligns as next resistance before 1.2400 (round level, static level) and 1.2450 (Fibonacci 50% retracement).

Looking south, supports could be spotted at 1.2330 (100-period SMA), 1.2300 (round level, static level) and 1.2230 (50-period SMA).

GBP/USD started the day under pressure on Tuesday but managed to reverse its direction in the second half of the day to close in positive territory. The pair stays relatively quiet and fluctuates at around 1.2350 in the European session on Wednesday.

Despite the uncertainty surrounding US President Donald Trump's tariff policies, Wall Street's main indexes opened higher following the long weekend and made it difficult for the US Dollar to stay resilient against its peers on Tuesday.

Early Wednesday, US stock index futures rise between 0.2% and 0.8%, suggesting that the market mood remains upbeat midweek. If risk flows continue to drive the action in financial markets in the American session, GBP/USD could continue to push higher.

The US economic calendar will not feature any high-tier data releases on Wednesday. On Thursday, the US Department of Labor will release the weekly Initial Jobless Claims data. Ahead of the weekend, preliminary January Services and Manufacturing PMI reports from both the UK and the US will be scrutinized by market participants.