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  • GBP/USD witnessed a modest pullback from one-week tops amid a modest USD uptick.
  • The continuation of a strong rally in the US bond yields helped revive the USD demand.
  • Hopes for a massive US fiscal stimulus pushed 10-year US bond yields to one-year tops.

The GBP/USD pair retreated around 30-35 pips during the early European session and dropped to the 1.3700 neighbourhood in the last hour.

The pair failed to capitalize on its early uptick to one-week tops, instead met with some supply near the 1.3740 region and for now, seems to have stalled its post-BoE rally from two-and-half-week lows. It is worth recalling that the GBP/USD pair witnessed some aggressive short-covering move from the 1.3565 region after the UK central bank pushed back expectations for negative interest rates.

Bulls, however, struggled to capitalize on the move and the GBP/USD pair remained below the 1.3755-60 congestion zone, or multi-year tops. As investors looked past Friday’s rather unimpressive US NFP report, the ongoing upsurge in the US Treasury bond yields helped revive the US dollar demand. This, in turn, was seen as a key factor that kept a lid on any further gains for the major.

Investors have been pricing in the prospects for a massive US fiscal stimulus to support the economy. Apart from this, progress in coronavirus vaccination fueled hopes for a strong economic recovery and continued pushing the US Treasury bond yields. In fact, the yield on the benchmark 10-year US bond rose to the highest level in nearly one-year and underpinned the greenback demand.

In the absence of any major market-moving economic releases, either from the UK or the US, the USD price dynamics might continue to act as an exclusive drive of the intraday movement. Nevertheless, the GBP/USD pair has now eroded a part of the previous day’s positive move and some follow-through weakness below the 1.3700 round-figure mark might prompt some aggressive technical selling.

Technical levels to watch