GBP/USD Analysis: Bulls not ready to give up despite a combination of negative factors

• A modest pickup in the USD demand prompted some long-unwinding around GBP/USD.
• Fitch downgraded its rating on the UK and exerted some additional pressure on the GBP.

The GBP/USD pair failed to capitalize on last week's strong positive move to two-week tops and witnessed some selling on the first day of a new trading week. The US dollar stalled its week-long bearish trend and attracted some safe-haven buying amid mounting fears over an imminent global recession. This comes amid the latest optimism over the passage of a massive $2.2 trillion US economic stimulus package and extended some support to the USD, prompting some long-unwinding trade around the major.

Apart from a modest pickup in the USD demand, the British pound was further pressurized by the fact that Fitch lowered its UK long-term issuer default ratings to AA- from AA. The rating agency cited the weakening of the UK's public finances caused by COVID-19 and the uncertainty about the post-Brexit trade relationship with the EU as key reasons behind the downgrade. Despite the negative factors, the downtick remained limited, rather attracted some dip-buying ahead of the 1.2300 round-figure mark.

Meanwhile, the USD uptick lacked any strong follow-through amid concerns about the economic fallout from the coronavirus pandemic. Given that the United States has the highest number of new coronavirus cases in the world, the US President Donald Trump extended restrictive social distancing guidelines to the end of April. Against the backdrop of tightening lockdowns across the world and an unprecedented jump in the US jobless claims, investors now seemed convinced that the Fed will be forced to add to its recent stimulus measures and held back from placing any aggressive USD bullish bets.

There isn't any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, fresh developments surrounding the coronavirus saga might continue to play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities. Moving ahead, market participants this week will also confront a slew of important macro data scheduled at the beginning of a new month, including the closely watched US monthly jobs report – popularly known as NFP – scheduled for release on Friday.

Short-term technical outlook

The pullback found some support near the 50% Fibonacci level of the 1.3200-1.1412 steep fall, which should now act as a key pivotal point for intraday traders. Below the mentioned support, around the 1.2315-10 region, the pair is likely to accelerate the slide further towards testing the 1.2200 round-figure mark. Any subsequent slide might still be seen as a buying opportunity and help limit the downside near 38.2% Fibo. level, around the 1.2100 round-figure mark.

On the flip side, momentum back above the 1.2400 mark now seems to confront a stiff resistance near the 1.2455-60 region. A convincing break through has the potential to lift the pair further beyond the key 1.2500 psychological mark and pave the way for a further near-term appreciating move. The pair then might accelerate the momentum further towards the 1.2600 round-figure mark ahead of the 1.2625 supply zone. The momentum could further get extended towards the very important 200-day SMA en-route the 1.2700 mark and the 1.2740 strong horizontal support break-point, now turned resistance.