GBP/USD trades with modest losses around 1.4170-65 area, downside seems limited

GBP/USD faced rejection near the 1.4200 mark and turned lower for the second consecutive day.
A combination of factors should help limit the downside and warrant caution for bearish traders.

Haresh Menghani FXStreet

The GBP/USD pair extended its steady intraday descent through the early European session and fell to fresh daily lows, around the 1.4170-65 region in the last hour.

The pair struggled to capitalize on Friday's goodish rebound of around 50 pips from the 1.4135 region and faced rejection near the 1.4200 mark on the first day of a new trading week. The GBP/USD pair has now drifted into the negative territory for the second consecutive session, though a combination of factors should help limit any meaningful slide, at least for the time being.

Despite stronger inflation data from the US, investors seem convinced that the Fed will retain its ultra-lose monetary policy for a longer period. Various FOMC officials have downplayed worries about runaway inflation and reiterated that any spike in prices would prove to be temporary. This might act as a headwind for the US dollar and extend some support to the GBP/USD pair.

On the other hand, the British pound might continue to benefit from the optimistic outlook for the UK economic recovery from the pandemic. Adding to this, the Bank of England policymaker Gertjan Vlieghe's hawkish comments, saying that the central bank could raise rates well into next year, should further underpin the sterling and warrants some caution for bearish traders.

Moreover, relatively thin liquidity conditions – amid holiday in Britain and the United States – might further hold traders from placing aggressive bets. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the GBP/USD pair has topped out in the near term and positioning for any meaningful corrective slide.

Technical levels to watch

GBP/USD

Overview
Today last price	1.4171
Today Daily Change	-0.0019
Today Daily Change %	-0.13
Today daily open	1.419

Trends
Daily SMA20	1.4082
Daily SMA50	1.3926
Daily SMA100	1.3872
Daily SMA200	1.3528

Levels
Previous Daily High	1.421
Previous Daily Low	1.4136
Previous Weekly High	1.4219
Previous Weekly Low	1.4092
Previous Monthly High	1.4009
Previous Monthly Low	1.3669
Daily Fibonacci 38.2%	1.4165
Daily Fibonacci 61.8%	1.4182
Daily Pivot Point S1	1.4148
Daily Pivot Point S2	1.4105
Daily Pivot Point S3	1.4073
Daily Pivot Point R1	1.4222
Daily Pivot Point R2	1.4253
Daily Pivot Point R3	1.4296

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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