- GBP/USD gained strong positive traction on Wednesday and shot to fresh 34-month tops.
- A pickup in the US bond yields extended some support to the USD and capped the upside.
- Overbought conditions further prompted the GBP bulls to take some profits off the table.
The GBP/USD pair surrendered a major part of the strong intraday gains to 34-month tops and might now be headed towards the lower end of its daily trading range. The pair was last seen trading around the 1.4135 region, up only 0.20% for the day.
The pair prolonged its recent bullish trajectory and gained some strong follow-through traction during the early part of the trading action on Wednesday. The British pound remained the best performing G-10 currency amid optimism that the impressive pace of COVID-19 vaccination will allow the UK economy to re-open more quickly than the rest of the world.
The momentum was further supported by a softer tone surrounding the US dollar and pushed the GBP/USD pair back above the 1.4200 mark for the first time since April 2018. However, a goodish pickup in the US Treasury bond yields extended some support to the greenback. This, along with near-term overbought conditions prompted some profit-taking around the major.
The US bond market continued reacting to the progress on US President Joe Biden’s proposed $1.9 trillion stimulus package. In the latest development, House Majority Leader Steny Hoyer said that a vote on the spending plan will be held on Friday, which helped offset the Fed Chair Jerome Powell’s dovish remarks during his congressional testimony on Tuesday.
It, however, remains to be see if the GBP/USD pair attracts fresh buying at lower levels or the pullback marks near-term bullish exhaustion. In the absence of any major market-moving economic releases, Powell’s second day of testimony before the House Financial Services Committee might influence the USD and provide some impetus to the major.
Technical levels to watch
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