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  • Resurgent USD demand prompted some aggressive selling around GBP/USD on Friday.
  • The sharp intraday decline managed stalled near 100-DMA, around the 1.3670 region.
  • The set-up still favours bearish traders and supports prospects for further weakness.

The GBP/USD pair witnessed some aggressive selling on the last trading day of the week and tumbled to over two-month lows, around the 1.3670 region.  A strong pickup in the US Treasury bond yields assisted the US dollar to stage a solid rebound from two-week lows. This, in turn, was seen as a key factor that exerted some heavy downward pressure on the GBP/USD pair.

Sustained weakness below the 1.3700 mark further aggravated the intraday bearish pressure. The GBP/USD pair, however, managed to find some support near the 100-day SMA and recovered around 50 pips, though lacked any follow-through.  The pair now seems to have stabilized near the 50% Fibonacci level of the 1.3188-1.4243 strong move up. This marks a congestion zone on the way up to multi-year tops and should now act as a pivotal point for traders.

Meanwhile, technical indicators on the daily chart maintained their bearish bias and are still far from being in the oversold territory. The set-up favours bearish traders and supports prospects for additional near-term weakness.  The GBP/USD pair remains vulnerable to break below the 1.3600 round-figure mark and drop to test the 61.8% Fibo. level, around the 1.3580-70 region. This nears the February monthly swing lows and might limit any further decline.

That said, some follow-through selling would mark a fresh bearish breakdown and drag the GBP/USD pair further towards the 1.3500 psychological mark. The downward trajectory could get extended towards YTD lows, around mid-1.3400s.

On the flip side, the 1.3730 area now seems to act as immediate resistance. Any subsequent move up might be seen as a selling opportunity and remain capped near the overnight swing highs, around the 1.3780 region.  This is closely followed by the 1.3800 mark and the 38.2% Fibo. level, around the 1.3820-25 region. A sustained move beyond will negate the bearish outlook and prompt some short-covering move, pushing the GBP/USD pair to the 1.3900 mark.

GBP/USD daily chart

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Technical levels to watch