- GBP/USD witnessed an aggressive short-covering move on Monday amid a broad-based USD weakness.
- The set-up favours bearish traders, warranting some caution before positioning for any further gains.
The GBP/USD pair refreshed daily tops heading into the North American session, with bulls looking to build on the momentum further beyond the 1.3700 mark. The mentioned handle coincides with a confluence hurdle, comprising of 100-hour SMA and the 23.6% Fibonacci level of the 1.3984-1.3602 recent leg down. A sustained move beyond will suggest that the pair has formed a temporary base near the 1.3600 mark and prompt some technical buying.
Investors pushed back the likely timing for the Fed's tapering plan amid worries about the economic fallout from the fast-spreading Delta variant of the coronavirus. This, along with the risk-on impulse, weighed on the safe-haven US dollar and provided a goodish lift to the GBP/USD pair. Meanwhile, RSI on the 1-hour chart is already flashing overbought conditions. Moreover, oscillators on the 4-hour chart – though have recovered from the negative zone – are yet to confirm a bullish bias. Adding to this, technical indicators on the daily chart are holding deep in the bearish territory.
This comes on the back of last week's sustained weakness below the 1.3725 horizontal support, which validated a bearish double-top breakdown on the daily chart. The technical set-up still seems tilted in favour of bearish traders, warranting some caution before positioning for any further gains. Hence, any subsequent move up is more likely to confront stiff resistance near the 1.3725 support breakpoint, which now coincides with the 38.2% Fibo. level. That said, some follow-through buying might trigger a fresh bout of the short-covering and push the back towards the 1.3800 mark.
On the flip side, any meaningful pullback now seems to find decent support near the 1.3650 level, below which the GBP/USD pair might aim back to challenge the 1.3600 mark. A convincing break below will be seen as a fresh trigger for bearish traders and prompt aggressive technical selling. The pair might then turn vulnerable to weaken further below July monthly swing lows support, around the 1.3570 region. The downward trajectory could further get extended and drag the pair towards the next relevant support near the 1.3500 psychological mark.
GBP/USD 1-hour chart
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD picks up fresh bids toward 0.6450 on renewed US Dollar selling
AUD/USD catches fresh bids and tests 0.6450 early Wednesday. Renewed US Dollar weakness on trade tensions over China outweigh the RBA's dovish outlook and the domestic political turmoil, aiding the pair's fresh leg higher. Focus remains on tariff talks and Fedspeak.
USD/JPY breaks below 144.00 amid unabated US Dollar supply
USD/JPY breaks below144.00 despite the disappointing release of Japan's trade balance data, as hawkish BoJ expectations continue to underpin the Japanese Yen. Meanwhile, the US Dollar extends losses amid Fed rate cut bets and a downgrade of the US government's credit rating, exerting additional pressure on the major.
Gold price looks to build on its recent strength beyond $3,300 mark
Gold price advances to over a one-week top in the Asian session on Wednesday, with bulls now awaiting a sustained move above the $3,300 mark before placing fresh bets. Moody's downgrade of US credit rating and Fed rate cut bets keep the US Dollar depressed near a two-week low. Further, persistent geopolitical uncertainty benefits the safe-haven Gold.
Ethereum Price Forecast: ETH holds steady at $2,500 despite increasing selling pressure
Ethereum (ETH) held steady above $2,500 on Tuesday despite investors stepping up their selling pressure with high profit-taking and loss realization activity.
China April slowdown shows the impact of economic uncertainty
Trade war uncertainty is denting Chinese confidence, resulting in slower economic activity in April. Retail sales and fixed-asset investment both underperformed forecasts amid heightened caution. Yet the impact on manufacturing was less than feared.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.