Pound sterling (GBP) forecast: Cable tipped to break through to 1.61

The British pound sterling (GBP) has recorded gains of half a percent against the US dollar through the course of Tuesday's trading session.

This is an emphatic return to form for the GBP and comes courtesy of an undeniably positive reading from the UK services sector.

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Analyst Boris Schlossberg at BK Asset Management says the possibility now exists for the pound to take a pop at the 1.61 level:

"The unit may try to make a run at the 1.6100 level as the day progresses, but for now it has found clear support above 1,6000 and is likely to hold that figure for the time being."

Also forecasting further gains for the pound sterling is Andy Scott at HiFX:

"We still expect the dollar to recover against the pound following the weakness brought about by the recent government shutdown and so still view 1.60 as a favourable level to buy dollars."

However, the run towards 1.61 will not be without challenges as we have some key resistance levels to watch out for. In addition, if we take a step back we note the Cable remains stuck in a longer term channel.

Ipek Ozkardeskaya at Swissquote Bank explains:

"GBPUSD continues to oscillate between 1.5884 and 1.6260 . With MACD threatening to cross below zeroline further extension of weakness should be expected after a short recovery rally (off critical support at 1.5884).

"However, critical support will be a key challenge for the bears. The support levels from here are 1.5884 (13th Sept high), 1.5759 (17th June high), 1.5726 (65 dma), 1.5600 (resistance turned support) then 1.5471 (200 dma). Watch for next resistance to come into play at 1.6082 (30th Oct pivot high), 1.6270 (1st Oct high) then 1.6343 (2013 high)."

Analysts at ICN Financla say that 1.6030 will be key to establishing a fresh wave higher:

"The pair moved sharply to the upside and stabilised above 1.5985 weakening our expectations, while consolidating above 1.6030 might fail our previous expectations. Therefore, if the pair stabilised above 1.6030 then we will witness another bullish wave today."