GBP/USD retakes 1.3900 mark and beyond, moves back closer to overnight swing highs

The GBP/USD pair rallied nearly 60 pips from the early European session lows and shot to fresh daily tops, around the 1.3915 region in the last hour.

The US dollar struggled to preserve its early gains, instead met with some fresh supply at higher levels and has now dropped to the lower end of its intraday trading range. This, in turn, was seen as a key factor that assisted the GBP/USD pair to attract some dip-buying near the 1.3860-55 region and turn positive for the third consecutive session.

Investors seem convinced that the Fed will keep interest rates near zero levels for a longer period. This continued acting as a key headwind for the USD and capped the attempted recovery from multi-week lows touched on Monday. Apart from this, the underlying bullish tone in the financial markets further undermined demand for the safe-haven greenback.

On the other hand, the British pound benefitted from the rapid rollout of coronavirus vaccines in the UK, the continuous decline in new cases and the progressive return to economic normality. In fact, more than 33.6 million people had received the first dose of the COVID-19 vaccine, while infections fell to the lowest level since September.

The GBP/USD pair edged back closer to the overnight swing lows, though any strong follow-through move seems elusive. Investors might refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of Wednesday's key event risk – the latest FOMC monetary policy decision. This warrants some caution for bullish traders.

Market participants now look forward to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index. The data, along with the broader market risk sentiment, will influence the USD price dynamics. This should allow traders to grab some short-term opportunities during the early North American session.

Technical levels to watch