GBP/USD flirts with session lows, remains depressed below mid-1.3700s
- Sustained USD buying exerted some pressure on GBP/USD for the second consecutive day.
- The upbeat US economic outlook, surging US bond yields continued underpinning the USD.
- The set-up favours bearish traders and supports prospects for a slide to test 100-day SMA.
The GBP/USD pair remained depressed through the mid-European session and was last seen hovering near the lower end of its daily trading range, below mid-1.3700s.
The pair failed to capitalize on its early uptick, instead met with some fresh supply near the 1.3780-85 region and drifted into the negative territory for the second straight session on Tuesday. The intraday downtick was exclusively sponsored by the prevalent strong bullish sentiment surrounding the US dollar.
The USD prolonged its recent bullish momentum and shot to four-month tops amid the prospects for a relatively faster US economic recovery from the pandemic. Investors remained optimistic about the outlook for the US economy amid the impressive pace of coronavirus vaccinations and the passage of a massive stimulus package.
Adding to this, expectations for an additional $3.0 trillion to $4 trillion infrastructure spending plan from the Biden Administration have been fueling the reflation trade. This, along with a sharp spike in the US Treasury bond yields, provided an additional boost to the greenback and exerted some pressure on the GBP/USD pair.
That said, a highly-successful vaccination distribution program and the easing of some lockdown restrictions in England might extend some support to the British pound. This, in turn, might help limit the downside for the GBP/USD pair, making it prudent to wait for some follow-through selling before placing fresh bearish bets.
Looking at the technical picture, acceptance below confluence support near mid-1.3700s might have already set the stage for further weakness. Hence, any attempted recovery move might still be seen as a selling opportunity. The GBP/USD pair now seems vulnerable to break below the 1.3700 mark and test 100-day SMA support near the 1.3630-25 region.
Next on tap will be the release of the Conference Board’s US Consumer Confidence Index. This, along with the US bond yields, will influence the USD price dynamics and produce some short-term trading opportunities around the GBP/USD pair.
Technical levels to watch
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March 30, 2021 at 06:12AM