GBP/USD Analysis: Bulls resilient near 1.2100 despite hawkish Fed, Brexit woes

• GBP/USD failed to capitalize on modest intraday gains and ended nearly unchanged on Monday.
• Aggressive Fed rate hike bets, recession fears underpinned the USD and acted as a headwind.
• Brexit woes, expectations of a less hawkish BoE contributed to capping the upside for the major.

The GBP/USD pair struggled to preserve its intraday gains and settled nearly unchanged for the day, just a few pips above the 1.2100 mark on Monday. Against the recent slump in the US Treasury bond yields, a slight improvement in the global risk sentiment and Friday's disappointing US ISM Manufacturing PMI undermined the safe-haven US dollar. This, in turn, was seen as a key factor that provided a modest lift to the major amid relatively thin trading volumes on the back of the Independence Day holiday in the US. The uptick, however, lacked bullish conviction and ran out of steam near the 1.2165 region.

The Fed's prospects for more aggressive rate hikes helped limit any deeper USD losses. It is worth recalling that Fed Chair Jerome Powell last week said that the US central bank remains focused on getting inflation under control and that the US economy is well-positioned to handle tighter policy. This, along with domestic issues, acted as a headwind for the British pound and kept a lid on any meaningful upside for the GBP/USD pair. Investors seem concerned that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union amid the ongoing cost of living crisis.

Sterling was further weighed down by expectations growing recession fears would force the Bank of England to adopt a gradual approach toward raising interest rates. Hence, market participants now look forward to the BoE's Financial Stability Report release later during the European session on Tuesday. This will be followed by BoE Governor Andrew Bailey's press conference about the report, which will influence the GBP price dynamics. Apart from this, the US factory order data might provide some impetus to the GBP/USD pair.

The focus, however, will remain on the FOMC monetary policy meeting minutes, due on Wednesday, which might provide a fresh insight into the Fed's policy tightening path. Traders will further take cues from Friday's release of the closely-watched US monthly jobs report (NFP). The combination of factors will drive the USD demand in the near term and help determine the next leg of a directional move for the GBP/USD pair.

Technical outlook

From a technical perspective, failure to capitalize on the recent bounce from the 1.1975 region, or the lowest level since May 14 touched on Friday, favours bearish traders. That said, the GBP/USD pair, so far, has been showing some resilience below the 1.2100 round-figure mark. This, in turn, warrants some caution before positioning for any further depreciating move.

In the meantime, the 1.2150-1.2160 region now seems to have emerged as an immediate hurdle, above which bulls might aim to surpass an intermediate hurdle near the 1.2185 zone and reclaim the 1.2200 mark. The momentum could extend towards the 1.2225 resistance en route to the next relevant barrier near the 1.2270-1.2280 supply zone.

On the flip side, sustained weakness below the 1.2100 mark would expose the 1.2000 psychological mark. This is closely followed by the monthly low, around the 1.1975 region, which if broken decisively would be seen as a fresh trigger for bearish traders. The GBP/USD pair might then slide towards challenging the YTD low, around the 1.1935-1.1930 region before eventually dropping to the 1.1900 round figure.