- GBP/USD witnessed some follow-through selling on Monday amid a broad-based USD strength.
- Rallying US bond yields, COVID-19 jitters continued underpinning the safe-haven greenback.
- Break below the 1.3430-25 support would set the stage for further weakness for the major.
The GBP/USD pair remained depressed through the early European session and was last seen trading near daily lows, around the key 1.3500 psychological mark.
The pair extended last week’s retracement slide from the 1.3700 mark, or 33-month tops and witnessed some follow-through selling for the fourth consecutive session on Monday. The downtick also marked the fifth day of a negative move in the previous six and was sponsored by sustained US dollar buying – amid the strong rally in the US Treasury bond yields.
Investors started pricing in the prospects for more aggressive fiscal spending in 2021 following the Democratic sweep in the US Senate runoff elections in the stage of Georgia. Expectations of a larger government borrowing pushed the US bond yields to their highest level since March and assisted the USD to move further away from recent multi-year lows.
Apart from this, the continuous surge in new coronavirus cases and the imposition of stricter lockdown restrictions to fight new variants tempered investors’ enthusiasm. This was evident from a softer tone around the equity markets, which further benefitted the greenback’s relative safe-haven status and exerted some additional pressure on the GBP/USD pair.
The pair dropped to two-week lows, around the 1.3480 region during the first half of the trading action on Monday and now seems vulnerable to slide further. The ongoing corrective slide has the potential to drag the GBP/USD pair further towards the 1.3430-25 support zone, which if broken should pave the way for additional near-term depreciating move.
There isn’t any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, the US bond yields might continue to influence the USD price dynamics. Apart from this, developments surrounding the coronavirus saga might further contribute to produce some short-term trading opportunities around the GBP/USD pair.
Technical levels to watch
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