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  • GBP/USD attracted some dip-buying on Tuesday and rallied over 80 pips from daily lows.
  • A subdued USD price action seemed to be the only factor fueling the positive momentum.
  • Brexit uncertainties, fresh COVID-19 jitters might keep a lid on any strong gains for the pair.

The GBP/USD pair rallied over 80 pips from intraday swing lows and refreshed daily tops, around the 1.3365-70 region during the mid-European session.

The pair witnessed some selling during the early part of the trading action on Tuesday, albeit showed some resilience at lower levels and managed to attract some dip-buying near the 1.3280 region. The US dollar languished near two-and-half-year lows amid hopes for additional US fiscal stimulus, which, in turn, was seen as a key factor that extended some support to the GBP/USD pair.

However, the lack of progress on post-Brexit trade talks tempered investors’ optimism that a deal can still be reached and might hold the GBP bulls from placing aggressive bets. It is worth recalling that the EU’s chief Brexit negotiator, Michel Barnier reiterated on Monday that there has been limited progress on enforcement mechanisms and disagreement on State Aid.

Apart from this, the imposition of stricter lockdown in London might further cap gains for the GBP/USD pair. The ever-increasing cases and the discovery of a new variant of the coronavirus seemed to have overshadowed the optimism about the rollout of COVID-19 vaccines. This makes it prudent to wait for some follow-through buying before positioning for any further appreciating move.

Market participants now look forward to the US economic docket – featuring the second-tier releases of the Empire State Manufacturing Index and Industrial Production figures. The data, along with the US stimulus headlines and the broader market risk sentiment, might influence the USD price dynamics and produce some meaningful trading opportunities around the GBP/USD pair.

Technical levels to watch