GBP/USD Outlook: Bulls looking to seize control, remain at the mercy of USD price dynamics

The GBP/USD pair regained positive traction on Tuesday and recovered a part of the previous day's heavy losses amid a broad-based US dollar weakness. The already stronger global risk sentiment got an additional boost after the US House of Representatives voted on Monday to increase stimulus payments to qualified Americans from $600 to $2,000. The upbeat market mood, in turn, undermined the greenback's safe-haven status and was seen as a key factor that provided a modest lift to the major.

The uptick seemed rather unaffected by concerns about the exclusion of the crucial services sector in Brexit agreement. In the latest Brexit-related development, EU member states formally approved the post-Brexit trade deal on Tuesday – just days ahead of the end of the transition period on December 31. Bulls even shrugged off worries about a sharp rise in new cases infected by a mutant coronavirus in the UK. Investors also looked past a Senate delay to increase COVID-19 relief payments to $2000.

Senate Majority Leader Mitch McConnell moved to block any attempt to unanimously pass the measure on Tuesday and tempered investors' enthusiasm and led to a modest pullback in the US equity markets. The move, however, did little to provide to ease the bearish pressure surrounding the USD, which crashed to fresh multi-year lows during the Asian session on Wednesday. Sustained USD selling bias allowed the pair to gain traction for the second consecutive session and move back above mid-1.3500s.

There isn't any major market-moving economic data due for release from the UK, leaving the pair at the mercy of the USD price dynamics. Meanwhile, the US economic docket features the release of Goods Trade Balance data, Chicago PMI and Pending Home Sales. This, along with the US stimulus headlines and the broader market risk sentiment, will be looked upon for some trading opportunities. That said, traders have little incentive to place fresh directional bets amid year-term thin liquidity conditions.

Short-term technical outlook

From a technical perspective, any subsequent positive move is likely to confront resistance near the 1.3575-80 region. This is closely followed by the 1.3600 mark and double-top hurdle near the 1.3620-25 region. Bulls might wait for a sustained move beyond the mentioned barriers before placing fresh bets. The pair might then accelerate the momentum and aim to reclaim the 1.3700 mark for the first time since May 2018.

On the flip side, immediate support is pegged near the 1.3520-15 region – marking the 23.6% Fibonacci level of the 1.3188-1.3620 recent strong move up. Failure to defend the mentioned support and a subsequent weakness below the key 1.3500 psychological mark might prompt some fresh technical selling. This should pave the way for a slide back towards the weekly lows, around the 1.3430-25 region.