GBP/USD Analysis: Bullish bias remains, focus shifts to this week’s BoE meeting and US NFP

The GBP/USD pair kicked off the new week on a positive note and touched an intraday high level of 1.3932 during the early European session. The uptick allowed the pair to reverse a part of Friday's retracement slide from over one month tops and was sponsored by a combination of factors. The British pound remained supported by the declining trend in Delta variant infections in the UK and positive Brexit-related development. In fact, Britain reported 24,470 new cases of COVID-19 on Sunday, down from 26,144 on Saturday.

Meanwhile, the European Union had rejected the UK's proposals designed to solve the Northern Ireland protocol dispute, though later decided to pause legal proceedings against the latter. This was seen as another factor that acted as a tailwind for the sterling. This, along with a subdued US dollar price action, provided an additional boost to the major. The key USD Index languished near one-month lows amid firming expectations that the Fed will wait for a longer period before slowing its massive monetary support.

The market speculations were reinforced by the recent decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond was seen struggling near multi-month lows touched in July and kept the USD bulls on the defensive. Apart from this, a generally positive tone around the equity markets was seen as another factor that undermined the greenback's relative safe-haven status. That said, the upside seems limited as investors seemed reluctant ahead of this week's key event/data risk.

The Bank of England (BoE) is scheduled to announce its latest monetary policy decision on Thursday. From the US, the release of the closely-watched US monthly jobs report – popularly known as NFP – will play a key role in influencing the USD price dynamics. This, in turn, should assist market participants to determine the next leg of a directional move for the major. In the meantime, Monday's release of the US ISM Manufacturing PMI will be looked upon for some trading impetus later during the early North American session.

Short-term technical outlook

From a technical perspective, the emergence of some dip-buying on Monday favours bullish traders. However, traders are likely to wait for a sustained strength beyond the 1.3975-80 supply zone before positioning for any further appreciating move. The pair might then surpass the 1.4000 psychological mark and aim to test the next relevant hurdle near the 1.4070 region. This is followed by the 1.4100 mark, which if cleared decisively will set the stage for an extension of the recent strong rebound from multi-month lows, around the 1.3570 region touched on July 20.

On the flip side, any meaningful pullback now seems to find some support near the 1.3900 mark ahead of the 1.3885 region. Sustained weakness below might prompt some technical selling and turn the pair vulnerable to accelerate the decline further towards the 1.3800 round figure. Failure to defend the mentioned support levels has the potential to drag the pair further towards the 1.3735 support zone, or the very important 200-day SMA. A convincing breakthrough will shift the near-term bias in favour of bearish traders.