GBP/USD Forecast: Likely to consolidate as focus shifts to BoE decision on Thursday

• A combination of diverging forces failed to provide any meaningful impetus to GBP/USD on Tuesday.
• Fears of a no-deal Brexit, the second wave of COVID-19 infections held the GBP bulls on the defensive.
• Sustained USD selling bias continued lending some support ahead of the BoE decision on  Thursday.

The GBP/USD pair continued with its two-way price moves on Tuesday and settled nearly unchanged for the day, forming a Doji candlestick on the daily chart for the second straight session. Fears about the second wave of coronavirus infections in the UK comes amid worries over a no-deal Brexit and kept investors shy of the British pound. However, the emergence of some fresh selling around the US dollar continued lending some support to the major and helped limit any deeper losses.

As investors looked past Monday's upbeat US ISM Manufacturing PMI, worries that the ever-increasing number of coronavirus cases could undermine the US economic recovery led to some renewed weakness for the greenback. Adding to this, the impasse over the US fiscal stimulus measures and the ongoing slump in the US Treasury bond yields exerted some additional pressure on the buck. It is worth reporting that Republicans and Democrats were still far apart on the coronavirus relief package.

Meanwhile, White House negotiators on Tuesday vowed to work "around the clock" with congressional Democrats to try to reach a deal by the end of this week. However, the US Treasury Secretary Steven Mnuchin warned that "we're not going anywhere close" to the $3.4 trillion that Democrats have been seeking. This, in turn, failed to provide any respite to the USD bulls, rather assisted the pair to rebound around 90 pips from an intraday swing low near the 1.2980 region.

The momentum prolonged through the first half of the trading action during the Asian session on Wednesday, albeit lacked any strong follow-through. The pair remained below the 1.3100 round-figure mark as investors now seemed to refrain from placing fresh bets ahead of the Bank of England monetary policy update on Thursday. In the meantime, Wednesday's release of the ADP report on private-sector employment and ISM Non-Manufacturing PMI data from the US will be looked upon for some meaningful trading impetus later during the early North American session.

Short-term technical outlook

From a technical perspective, the pair’s inability to regain any strong positive traction could be the first signs of possible bullish exhaustion. However, it will be prudent to wait for some strong follow-through selling before confirming that the pair might have already topped out in the near-term. Hence, any meaningful slide back towards the key 1.3000 psychological mark might still be seen as a buying opportunity. That said, a convincing breakthrough, leading to a subsequent weakness below the overnight swing lows, around the 1.2980 region, now seems to accelerate the fall further towards the 1.2900 round-figure mark.

On the flip side, sustained move back above the 1.3100 mark has the potential to lift the pair back towards multi-month tops, near the 1.3170 region. This is closely followed by the 1.3200 mark (March swing highs), above which the pair seems all set to retest YTD tops, around the 1.3265 region, before bulls eventually aim to reclaim the 1.3300 round-figure mark.