GBP/USD: Will it extend the recovery above 1.3500 ahead of Yellen?

The overnight recovery in GBP/USD has come to a stall in the Asian trades, with the bulls now turning cautious amid persisting moderate risk-aversion and a lack of Brexit clarity.

GBP/USD struggles below daily pivot at 1.3494

The spot found some support from a broadly weaker US dollar, after Treasury yields fell across the curve on North Korea’s accusations that the US is declaring a war. More so, dovish remarks from Chicago Fed President Evans also added to the weight on the buck.

Fed's Evans: Gradual, cautious approach to policy normalization is appropriate

Meanwhile, the cross in EUR/GBP takes a breather from yesterday’s sell-off, triggered by disappointing German election outcome, capping further recovery in Cable. Also, the UK PM May’s failure to deliver a Brexit strategy last Friday keeps the GBP bulls on the edge.

Additionally, the upside could also lack momentum, in the wake of the UK’s sovereign ratings downgrade by Moody’s last week. "Moody’s downgraded the UK’s sovereign rating to Aa2 Friday to round off a fairly disappointing day for PM May following her Florence Brexit “reboot” speech which seemed to do no such thing,” Scotiabank Anaylsts explained.

Focus now shifts towards a fresh batch of US macro news and Fed Chair Yellen’s speech titled "Inflation, Uncertainty, and Monetary Policy" in Cleveland for fresh momentum.

GBP/USD levels to consider             

According to Ross J. Burland, Analyst at FXStreet, “technically, 1.3443 remains as the supporting area ahead of a deeper retracement to 1.3350. On the flipside, a break of the 1.3580/90 resistance area opens up 1.3640/70 as a double Fibo target and the 2014-2017 downtrend target.”