GBP/USD rebounds swiftly from 100-DMA support, jumps back above 1.3700 mark

GBP/USD witnessed an intraday short-covering from 100-day SMA, near the 1.3670-65 region.
Sliding US bond yields capped the upside for the USD bulls and extended support to the major.
The set-up remains tilted in favour of bearish trades and supports prospects for further losses.

Haresh Menghani FXStreet

The GBP/USD pair recovered over 50 pips from two-month lows and jumped to fresh daily tops, around the 1.3720-25 region during the early European session.

A weaker tone surrounding the US Treasury bond yields kept a lid on any strong gains for the US dollar, at least for the time being. This, in turn, assisted the GBP/USD pair to once again rebound from the 100-day SMA support, near the 1.3670-65 region. That said, a combination of factors might hold bulls from placing aggressive bets and cap the upside for the major.

A possible link between the AstraZeneca coronavirus vaccine and a rare blood clotting disorder forced the UK's medical regulator to issue a temporary ban on the jab for the below 30 age group. The development could delay the UK government's plan to reopen the economy and could act as a key headwind for the British pound amid the latest unrest in Northern Ireland.

On the other hand, a slight deterioration in the global risk sentiment and Fed Chair Jerome Powell's upbeat comments should continue to underpin demand for the safe-haven USD. News that one of Iran's nuclear facilities was hit by a terrorist act dented investor’s appetite for perceived riskier assets and benefitted traditional safe-haven assets, including the USD.

Meanwhile, Powell – during an interview with 60 Minutes over the weekend – said that the US economy is set to make a turnaround and increased growth should provide more jobs. The comments reinforced market expectations for a relatively faster US economic recovery, bolstered by the impressive pace of coronavirus vaccinations and US President Joe Biden's spending plan.

Powell further added that the Fed wants inflation moderately above 2% for some time but does not want it to go materially above 2%. It is worth mentioning that the reflation trade has been fueling speculations about an uptick in US inflation and raised doubts that the Fed will retain ultra-low interest rates for a longer period, which could further lend support to the USD.

The fundamental backdrop still favours bearish traders and hence, the intraday bounce could be solely attributed to some short-covering move, which runs the risk of fizzling out rather quickly. Any subsequent positive move might still be seen as a selling opportunity near the 1.3735-40 region amid absent relevant market-moving economic releases, either from the UK or the US.

Technical levels to watch

GBP/USD

Overview
Today last price	1.371
Today Daily Change	0.0002
Today Daily Change %	0.01
Today daily open	1.3708

Trends
Daily SMA20	1.3811
Daily SMA50	1.3854
Daily SMA100	1.3686
Daily SMA200	1.3334

Levels
Previous Daily High	1.3751
Previous Daily Low	1.367
Previous Weekly High	1.3919
Previous Weekly Low	1.367
Previous Monthly High	1.4017
Previous Monthly Low	1.3671
Daily Fibonacci 38.2%	1.3701
Daily Fibonacci 61.8%	1.372
Daily Pivot Point S1	1.3669
Daily Pivot Point S2	1.3629
Daily Pivot Point S3	1.3588
Daily Pivot Point R1	1.3749
Daily Pivot Point R2	1.379
Daily Pivot Point R3	1.383

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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