- A broad-based USD strength exerted follow-through pressure around GBP/USD on Monday.
- The US bond yields rallied further amid hopes for more US stimulus and underpinned the USD.
- Technical selling below the 1.3540-35 support might have set the stage for additional weakness.
The GBP/USD pair continued losing ground through the mid-European session and dropped to fresh two-week lows, around the 1.3465 region in the last hour.
The pair witnessed some selling for the fourth consecutive session on Monday and extended its retracement slide from 33-month highs, around the 1.3700 mark touched last week. The momentum dragged the GBP/USD pair further below one-week-old horizontal support near the 1.3540 region and was sponsored by the ongoing recovery in the US dollar.
The recent strong rally in the US Treasury bond yields – triggered by hopes additional US fiscal stimulus measures – allowed the USD to recover further from nearly three-year lows. Investors started pricing in the prospects for a more aggressive US fiscal spending in 2021 following the Democratic sweep in the US Senate runoff elections in Georgia.
Meanwhile, concerns about the continuous surge in new coronavirus cases and the imposition of strict lockdown restrictions in Europe/China to fight the new variants tempered investors’ enthusiasm. This was evident from a pullback in the equity markets, which further benefitted the safe-haven greenback and contributed to the GBP/USD pair’s decline.
From current levels, the downward trajectory could further get extended towards the next relevant support near the 1.3430-25 region amid absent relevant market moving economic releases. That said, the broader market risk sentiment will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the GBP/USD pair.
Technical levels to watch
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