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  • GBP/USD staged a goodish bounce amid a modest USD pullback from higher levels.
  • Rebounding equities prompted some profit-taking around the safe-haven greenback.
  • An uptick in the US bond yields underpinned the USD and capped gains for the major.

The GBP/USD pair rallied around 75 pips during the mid-European session and jumped to the top end of its daily trading range, albeit lacked follow-through. The pair was last seen trading around the 1.3915 region, nearly unchanged for the day.

A goodish rebound in the equity markets capped the intraday gains for the safe-haven US dollar, rather prompted some profit-taking near one-month tops. This, in turn, was seen as one of the key factors that assisted the GBP/USD pair to attract some dip-buying near the 1.3860-55 region, or one-and-half-week lows.

That said, the upbeat US economic outlook helped limit any meaningful USD downside and kept a lid on any further gains for the GBP/USD pair. Investors remain optimistic about a relatively strong US economic recovery from the pandemic amid the progress in COVID-19 vaccinations and a massive US fiscal stimulus plan.

Meanwhile, the reflation trade seemed to have forced investors to price in an uptick in inflation and raised doubts that the Fed would retain ultra-low rates for a longer period. Apart from this, expectations that the Fed will show greater tolerance to higher bond yields might continue to underpin the greenback.

The GBP/USD pair stalled its intraday uptick near 100-period SMA on the 4-hourly chart. This further makes it prudent to wait for some strong follow-through buying before confirming that the recent sharp pullback from near three-year tops run its course and positioning for the resumption of the prior bullish trajectory.

There isn’t any major market-moving economic data due for release from the US on Tuesday. Hence, the US bond yields will continue to play a key role in influence the USD price dynamics. Apart from this, the broader market risk sentiment will also be looked upon for some short-term trading opportunities around the GBP/USD pair.

Technical levels to watch

 

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