GBP/USD bounces off multi-week lows, upside seems limited

Sustained USD buying kept a lid on the GBP/USD pair’s intraday positive move.
Retreating US bond yields capped gains for the USD and exerted some support.
Brexit/COVID-19 woes, hawkish Fed supports prospects for a further downfall.

Haresh Menghani FXStreet

The GBP/USD pair reversed an intraday dip to fresh six-week lows and was last seen trading in the neutral territory, below the key 1.4000 psychological mark.

The pair witnessed some selling during the early European session and dropped to the lowest level since May 7, though lacked any strong follow-through. The downtick was exclusively sponsored by strong follow-through buying around the US dollar, which remained well supported by a sudden hawkish shift by the Fed.

In fact, the Fed stunned investors and signalled that it might raise interest rates at a much faster pace than anticipated earlier. The so-called dot plot indicated two rate hikes by the end of 2023 as against March's projection for no increase until 2024. Moreover, seven members pencilled in a rate hike or more in 2022.

Meanwhile, the Fed's super hawkish pivot dampened investors' appetite for perceived riskier assets and further benefitted the greenback's relative safe-haven status. However, a modest decline in the US Treasury bond yields held the USD bulls from placing aggressive bets and helped limit any further losses for the GBP/USD pair.

That said, any meaningful recovery still seems elusive amid concerns about the EU-UK collision over Northern Ireland protocol. In the latest developments, the UK Prime Minister Boris Johnson said on Wednesday that they will have to take steps to make sure the post-Brexit trade between Britain and N. Ireland is uninterrupted.

This comes on the back of the UK government's decision to push back the timeline for the final stage of easing lockdown measures to July 19. The move dampened prospects for a strong UK economic recovery from the pandemic. This, in turn, might continue to act as a headwind for the British pound and cap gains for the GBP/USD pair.

Market participants now look forward to the US economic docket – featuring the release of the Philly Fed Manufacturing Index and the usual Initial Weekly Jobless Claims. This, along with the US bond yields and the broader market risk sentiment, might influence the USD price dynamics and provide some impetus to the GBP/USD pair.

Technical levels to watch

GBP/USD

Overview
Today last price	1.399
Today Daily Change	0.0001
Today Daily Change %	0.01
Today daily open	1.3989

Trends
Daily SMA20	1.4144
Daily SMA50	1.4015
Daily SMA100	1.3935
Daily SMA200	1.3587

Levels
Previous Daily High	1.4133
Previous Daily Low	1.3983
Previous Weekly High	1.4191
Previous Weekly Low	1.4073
Previous Monthly High	1.4234
Previous Monthly Low	1.3801
Daily Fibonacci 38.2%	1.404
Daily Fibonacci 61.8%	1.4075
Daily Pivot Point S1	1.3937
Daily Pivot Point S2	1.3885
Daily Pivot Point S3	1.3787
Daily Pivot Point R1	1.4087
Daily Pivot Point R2	1.4185
Daily Pivot Point R3	1.4237

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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