GBP/USD eases from multi-month tops, still well bid above 1.2800 mark

• The heavily offered tone surrounding the USD assisted GBP/USD to add to last week’s gains.
• Concerns about rising COVID-19 cases, worsening US-China relations undermined the USD.
• Sliding US bond yields, the risk-on mood exerted some additional pressure on the greenback.

The GBP/USD pair shot to its highest level since March 11 during the Asian session, albeit retreated few pips thereafter and was last seen hovering around the 1.2820-25 region.

The pair added to last week’s strong gains and gained traction for the sixth consecutive session on Monday. The heavily offered tone surrounding the US dollar remained unabated and was seen as one of the key factors driving the pair higher. The greenback remained depressed on the first day of a new trading week amid worries that the resurgence of COVID-19 cases could undermine the US economic recovery.

Adding to this, intensifying US-China tensions fueled speculations that the Fed would continue adding more stimulus for a longer period of time and in bigger quantities to support the economy. This was evident from the ongoing downfall in the US Treasury bond yields, which exerted some additional pressure on the greenback and remained supportive of the GBP/USD pair’s strong momentum beyond the 1.2800 mark.

It is worth reporting that diplomatic tensions between the world’s two largest economies escalated further last week after both sides ordered the closure of consulates in Houston and Chengdu. The greenback, however, struggled to attract any safe-haven bids, instead was further pressured by a positive tone around the equity markets and lifted the GBP/USD pair to intraday highs, around the 1.2855-60 region.

However, slightly overbought conditions on short-term charts held investors from placing any further bullish bets and led to a modest pullback of around 35-40 pips. This comes amid renewed fears of a no-deal Brexit, which might further contribute towards capping any strong gains for the GBP/USD pair, at least for the time being.

Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders. 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