GBP/USD holds steady below mid-1.2600s ahead of Services PMIs from UK and US

GBP/USD trades with a mild positive bias on Tuesday amid subdued USD price action.
Fed rate cut bets trigger a fresh leg down in the US bond yields and undermine the USD.
A softer risk tone helps limit losses for the safe-haven buck and keeps a lid on the pair.

Haresh Menghani FXStreet

The GBP/USD pair edges higher during the Asian session on Tuesday and looks to build on the overnight bounce from the 1.2600 mark, representing the lower boundary of a one-week-old trading range. Spot prices currently hover around the 1.2630-1.2635 region and draw support from a combination of factors.

The US Dollar (USD) struggles to capitalize on the previous day's strong move up to over a one-week top amid expectations that the Federal Reserve (Fed) will not hike interest rates again and may start easing its policy as early as March 2024. This triggers a fresh leg down in the US Treasury bond yields and keeps the USD bulls on the defensive, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair.

The British Pound (GBP), on the other hand, is underpinned by diminishing odds for an early rate cut by the Bank of England (BoE). In fact, BoE Governor Andrew Bailey recently warned that it was too early to declare victory over inflation and predicted that monetary policy will have to stay restrictive for quite some time to make sure that inflation gets back to the 2% target. This further contributes to the GBP/USD pair's uptick.

That said, a softer risk tone is seen lending some support to the safe-haven Greenback and holding back traders from placing aggressive directional bets. Investors also seem reluctant and prefer to wait on the sidelines ahead of this week's important US macro data, starting with the release of the ISM Services PMI later during the early North American session. The focus, however, will remain on the key US NFP report on Friday.

Nevertheless, the aforementioned fundamental backdrop seems tilted in favour of bullish traders and suggests that the path of least resistance for the GBP/USD pair is to the upside. However, it will still be prudent to wait for a sustained move beyond the 1.2725-1.2730 supply zone, or the top end of a short-term trading range, before positioning for any further appreciating move ahead of the final UK Services PMI print.

Technical levels to watch

GBP/USD

Overview
Today last price	1.2634
Today Daily Change	0.0002
Today Daily Change %	0.02
Today daily open	1.2632

Trends
Daily SMA20	1.2487
Daily SMA50	1.2307
Daily SMA100	1.2478
Daily SMA200	1.2474

Levels
Previous Daily High	1.2724
Previous Daily Low	1.2604
Previous Weekly High	1.2733
Previous Weekly Low	1.2591
Previous Monthly High	1.2733
Previous Monthly Low	1.2096
Daily Fibonacci 38.2%	1.265
Daily Fibonacci 61.8%	1.2678
Daily Pivot Point S1	1.2582
Daily Pivot Point S2	1.2533
Daily Pivot Point S3	1.2462
Daily Pivot Point R1	1.2703
Daily Pivot Point R2	1.2774
Daily Pivot Point R3	1.2823

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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