GBP/USD Analysis: Bulls remain on the defensive amid reviving USD demand

The GBP/USD pair traded with a mild negative bias on the first day of a new trading week and was being weighed down by a combination of factors. The British pound was pressurized by the fact that Fitch lowered its UK long-term issuer default ratings to AA- from AA, citing the weakening of UK's public finances amid COVID-19 crisis and the uncertainty about the post-Brexit trade relationship with the EU.

On the other hand, the US dollar stalled its week-long bearish trend, rather gained some positive traction and contributed to the pair's downtick. The ever-increasing number of confirmed coronavirus cases across the world continued fueling concerns over an imminent global recession. This coupled with the optimism over a massive $2.2 trillion US economic stimulus package extended some support to the greenback.

The pair snapped four consecutive days of a winning streak, albeit lacked any strong follow-through and recovered around 100 pips from daily swing lows. The pair, however, failed to capitalize on the overnight bounce and witnessed some aggressive selling during the Asian session on Tuesday. Growing concerns over the economic fallout from the coronavirus pandemic provided a goodish lift to the greenback's perceived safe-haven status and turned out to be one of the key factors weighing on the major.

The pair tumbled to an intraday low level of 1.2245 but once again showed some resilience at lower levels and quickly recovered back above mid-1.2300s. Meanwhile, the latest UK macro data, confirming that the economic growth remained flat during the final quarter of 2019, did little to provide any meaningful impetus to the major. Later during the early North-American session, the US economic docket – featuring the release of Chicago PMI and Conference Board's Consumer Confidence index – will now be looked upon for some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the pair’s overnight pullback from the vicinity of the 61.8% Fibonacci level of the .3200-1.1412 steep decline showed some resilience below 50% Fibo. level. Hence, it will be prudent to wait for a sustained weakness below the Asian session swing lows before positioning for any further near-term depreciating move. Below the mentioned support, the pair is likely to accelerate the slide further towards testing sub-1.2100 levels (38.2% Fibo.) with some intermediate support near the 1.2200 round-figure mark.

On the flip side, the 1.2400-1.2410 region now seems to have emerged as an immediate resistance, which if cleared decisively should assist the pair to make a fresh attempt towards conquering the key 1.2500 psychological mark (61.8% Fibo.). Some follow-through buying now seems to pave the way for an extension of the recent recovery move from 35-year lows. The pair then might accelerate the momentum further towards the 1.2600 round-figure mark ahead of the 1.2625 supply zone and the very important 200-day SMA, around the 1.2675 region.