- GBP/USD witnessed some selling on Thursday and extended this week’s retracement slide.
- Cross-driven weakness stemming from a sharp rise in EUR/GBP exerted pressure on the pair.
- A modest USD corrective slide extended some support and helped limit any further losses.
The GBP/USD pair extended its steady intraday descent and dropped to fresh weekly lows, around the 1.3740 region during the early North American session.
Following the previous day's good two-way price moves, the GBP/USD pair met with some fresh supply on Thursday and extended this week's rejection slide from the 1.3900 neighbourhood. The downfall was exclusively sponsored by some cross-driven weakness stemming from a strong rally in the EUR/GBP cross, though a sharp pullback in the US dollar helped limit losses.
As investors digested Wednesday's hawkish FOMC meeting minutes, the USD witnessed some profit-taking amid a sudden pickup in demand for the shared currency. Apart from this, an extension of the recent decline in the US Treasury bond yields and an unexpected rise in the US Initial Weekly Jobless Claims exerted some additional pressure on the greenback.
That said, indications that the Fed is moving towards tapering its asset purchases earlier than anticipated could act as a tailwind for the USD. The June FOMC meeting minutes revealed that policymakers agreed that they must be ready to act if inflation or other risks materialize, suggesting that QE tapering discussions could begin in the coming months.
This, along with the prevalent risk-off environment, might also extend some support to the safe-haven USD. Worries about the economic fallout from the spread of the highly contagious Delta variant of COVID-19 took its toll on the global risk sentiment. This was evident from a sea of red in the equity markets, which tends to benefit traditional safe-haven currencies.
The fundamental backdrop favours bearish traders and supports prospects for further weakness. Some follow-through selling below monthly swing lows, around the 1.3730 region, will reaffirm the negative outlook and prompt some aggressive technical selling. The GBP/USD pair might then turn vulnerable to fall back to test the 1.3665 strong horizontal support.
Technical levels to watch
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