GBP/USD Analysis: Bears looking to seize control below descending triangle support

The GBP/USD pair struggled to capitalize on its post-BoE positive move and witnessed heavy selling on Friday amid a broad-based US dollar strength. Stronger-than-expected US monthly jobs report fueled speculations that the Fed could start tapering its asset purchases later this year, which, in turn, provided a strong lift to the greenback. In fact, the headline NFP print showed that the US economy added 943K new jobs in July, surpassing even the most optimistic estimates. Adding to this, the previous month's reading was also revised higher to 938K from 850K reported earlier.

Further details revealed that the US unemployment rate dropped from 5.9% in June to 5.4% during the reported month, beating expectations of 5.7%. There was also good news on the wage front as average hourly earnings surged 4.0% YoY, marking another step toward the Fed's goal of substantial further progress in the labor market recovery. The report forced investors to bring forward the likely timing for the Fed policy tightening, as soon as early 2020. This was evident from a sharp surge in the US Treasury bond yields, which turned out to be another factor that underpinned the buck.

The yield on the benchmark 10-year US government bond jumped back above the 1.30% threshold during the Asian session on Monday and continued acting as a tailwind for the greenback. Apart from this, worries that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery further benefitted the safe-haven USD. The combination of factors dragged the pair to one-and-half-week lows, though bulls managed to find some support near mid-1.3800s amid the recent optimism over the declining trend of new coronavirus cases in the UK.

There isn't any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, the US bond yields, along with the broader market risk sentiment will play a key role in influencing the USD price dynamics and provide some impetus to the major. Traders might further take cues from scheduled speeches by Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin for some meaningful opportunities around the pair.

Short-term technical outlook

From a technical perspective, the recent pullback from the vicinity of the 1.4000 psychological mark constituted the formation of a double-top on the daily chart. Moreover, repeated failures near a short-term descending trend-line resistance and subsequent weakness below the 1.3870 horizontal support now seems to have confirmed a descending triangle breakdown. The combination of bearish patterns suggests that the recent strong rebound from the lowest level since early February has run out of steam.

However, the lack of any strong follow-through selling warrants some caution for aggressive bearish traders. This makes it prudent to wait for a convincing break below the 38.2% Fibonacci level of the 1.4249-1.3572 downfall, around the 1.3830 region, before positioning for any further depreciating move. The pair might then turn vulnerable to slide further below the 1.3800 mark and extend the downward trajectory towards the 1.3765-60 support en-route 1.3730-25 region, or the 23.6% Fibo. level.

On the flip side, any meaningful recovery now seems to confront some resistance near the 1.3900 mark. This is closely followed by the 1.3920 confluence hurdle, comprising 100-day SMA and the mentioned descending trend-line. A sustained strength beyond, leading to some follow-through move beyond mid-1.3900s might prompt some technical buying. The pair might then aim back to challenge the double-top resistance near the 1.4000 mark, which if cleared will shift the bias back in favour of bullish traders.