GBP/USD trades with modest losses below mid-1.3900s


  • Sustained USD buying prompted some selling around GBP/USD on Thursday.
  • The downside seems limited ahead of the Fed Chair Jerome Powell’s speech.

The GBP/USD pair quickly retreated around 35-40 pips from the early European session highs and dropped to fresh daily lows, around 1.3930-25 region in the last hour.

The pair struggled to capitalize on its intraday uptick, rather met with some fresh supply near the 1.3965-70 region and was pressured by sustained US dollar buying interest. Investors remained optimistic about the prospects for a relatively stronger US economic recovery amid the progress on COVID-19 vaccinations and a massive US fiscal spending plan. The upbeat US economic outlook continued underpinning the USD, which, in turn, was seen as a key factor that exerted some pressure on the GBP/USD pair.

Meanwhile, the reflation trade has been fueling expectations for a possible uptick in the US inflation and raised doubts that the Fed would retain ultra-low interest rate for a longer period. This, along with a cautious mood around the equity markets, further benefitted the greenback's relative safe-haven status against its British pound. That said, a modest pullback in the US Treasury bond yields held the USD bulls from placing aggressive bets and helped limit any further losses for the GBP/USD pair, at least for now.

The sterling was further supported by expectations that the UK government's plan to end lockdown restrictions by 21 June would lead to a swift economic recovery. That said, the lack of any meaningful buying interest and repeated failed attempts to move back above the key 1.4000 psychological mark suggests that the positive news is fully priced in. Hence, any attempted move up runs the risk of fizzling out rather quickly.

That said, investors might refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of the Fed Chair Jerome Powell's scheduled speech later during the North American session. Powell's comments on the risk of a rapid rise in long-term borrowing costs will drive the US bond yields and influence the USD price dynamics. This would eventually allow traders to grab some short-term opportunities.

Technical levels to watch

GBP/USD

Overview
Today last price 1.3938
Today Daily Change -0.0014
Today Daily Change % -0.10
Today daily open 1.3952
 
Trends
Daily SMA20 1.3911
Daily SMA50 1.374
Daily SMA100 1.3484
Daily SMA200 1.3155
 
Levels
Previous Daily High 1.4006
Previous Daily Low 1.3921
Previous Weekly High 1.4243
Previous Weekly Low 1.389
Previous Monthly High 1.4243
Previous Monthly Low 1.3566
Daily Fibonacci 38.2% 1.3954
Daily Fibonacci 61.8% 1.3974
Daily Pivot Point S1 1.3913
Daily Pivot Point S2 1.3874
Daily Pivot Point S3 1.3828
Daily Pivot Point R1 1.3999
Daily Pivot Point R2 1.4045
Daily Pivot Point R3 1.4084

 

 

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