- GBP/USD extended the previous session’s pullback from three-month tops.
- The risk-off mood benefitted the safe-haven USD and exerted some pressure.
- Sliding US bond yields capped the USD gains and helped limit deeper losses.
- A sustained break below weekly lows needed to confirm any further weakness.
The GBP/USD pair managed to rebound around 60 pips from daily swing lows, with bulls now looking to extend the intraday recovery move further beyond the 1.2700 mark.
The pair witnessed some aggressive long-unwinding trade on Thursday and extended the previous day’s late pullback from three-month tops – levels beyond the 1.2800 round-figure mark. A strong pickup in the US dollar demand was seen as one of the key factors that prompted some long-unwinding trade around the GBP/USD pair.
The Fed’s gloomy outlook kept a lid on the recent optimism over a sharp V-shaped economic recovery. This, in turn, triggered a fresh wave of the global risk-aversion trade and led to a sharp pullback in the equity markets. The anti-risk flows turned out to be a key factor that boosted the greenback’s safe-haven status.
The USD, however, struggled to preserve its early gains, instead met with some supply at higher levels amid the ongoing downfall in the US Treasury bond yields. A modest USD pullback assisted the GBP/USD pair to find some support near mid-1.2600s and recover a part of the early losses back closer to weekly lows.
Hence, it will be prudent to wait for some strong follow-through selling, possibly below weekly lows support near the 1.2620-15 region, which coincides with the 200-day EMA, before positioning for any further near-term depreciating move.
In the absence of any major market-moving economic releases from the UK, the pair remains at the mercy of the USD price dynamics. Later during the early North American session, the release of Producer Price Index and Initial Weekly Jobless Claims will be looked upon for some short-term trading opportunities.
Technical levels to watch
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