GBP/USD falls short of 1.2200 handle, retreats to 1.2160 ahead of May

The GBP/USD pair trimmed some of its upbeat UK CPI-led gains to 1.2200 neighborhood, albeit has managed to hold strong recovery gains off Monday's post-flash-crash low below 1.20 psychological mark.

Bears rushed to cover their bearish bets after UK CPI print for December surpassed expectations and came-in to show a yearly rise of 1.6% as compared to 1.4% expected and 1.2% recorded in November. The pair, however, quickly retreated around 70-pips and dropped back to 1.2117 level before regaining some traction to currently trade around 1.2160 region. 

Meanwhile, an offered tone surrounding the greenback, with the key US Dollar Index sliding further below 101.00 handle, is also supporting the strong bid tone surrounding the major as markets now eagerly await for UK Prime Minister Theresa May's much awaited speech on Brexit.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet notes, "according to the 4 hours chart, the upward potential remains limited, given that technical indicators have recovered from oversold territory and head higher, but still below their mid-lines, whilst the price its 20 SMA that anyway maintains a bearish slope."

She further writes, "Above the daily high, the next resistance comes at 1.2220, with a break above it supporting an upward extension up to the 1.2260/80 region. A break below 1.2130 on the other hand, will lean the scale towards the downside, with 1.2080 and 1.2040 as the next intraday supports."