GBP/USD reverses early dip, flat-lined around mid-1.3000s

The GBP/USD pair edged higher during the early European session and refreshed daily tops, around the 1.3067 region in the last hour, albeit lacked any strong follow-through.

Following the previous day's intraday pullback of around 90 pips and a subsequent dip to weekly lows, the pair managed to attract some dip-buying and was being supported by a combination of factors. The British pound found some support following the release of better-than-expected UK GDP report, which showed that the economy expanded by 8.7% in June as against consensus estimates pointing to a growth of 8%.

Meanwhile, the preliminary figures showed that the UK economy contracted by 20.4% in the second quarter of 2020 as compared to a 2.2% contraction recorded in the previous quarter. Two consecutive periods of contraction means that the British economy is now in a technical recession. The report, however, did little to impress bearish traders or prompt any meaningful selling around the British pound.

On the other hand, the US dollar struggled to preserve its intraday gains amid the uncertainty over the next round of the US fiscal stimulus measures. This, in turn, was seen as one of the key factors that extended some support to the GBP/USD pair. Meanwhile, hopes of a US economic recovery and some follow-through pickup in the US Treasury bond yields extended some support to the USD and capped the upside for the major.

From a technical perspective, the pair has been confined in a range over the past week or so. This further makes it prudent to wait for a sustained move in either direction and positioning for the pair's near-term trajectory. A convincing break through the key 1.3000 psychological mark will be seen as a fresh trigger for bearish traders and set the stage for an extension of the GBP/USD pair's retracement slide from multi-month tops.

Moving ahead, market participants now look forward to the release of the latest US consumer inflation figures for July. The data might influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session.

Technical levels to watch