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  • GBP/USD failed to capitalize on the early uptick and drifted back closer to YTD lows.
  • A fresh wave of USD buying interest seemed to be the only factor exerting pressure.
  • The risk-on mood-led rebound in the US bond yields underpinned the USD demand.

The GBP/USD pair dropped to fresh session lows, around the key 1.2500 psychological mark and moved well within the striking distance of YTD lows set on Thursday.

The pair failed to capitalize on the attempted intraday positive move, rather met with some fresh supply near the 1.2625 region and drifted back into the negative territory for the fourth consecutive session amid a broad-based US dollar strength.

Following a brief consolidation through the mid-European session on Friday, the USD managed to regain positive traction and added to the previous day’s strong recovery move, this time backed by a strong recovery in the US Treasury bond yields.

A sharp recovery in the global risk sentiment, supported by a coordinated effort by the Fed and the BoJ, was seen weighing heavily on traditional safe-haven assets, including the US Treasuries, which triggered a fresh wave of the USD buying interest.

It is worth recalling that the Fed on Thursday said that it will inject more than $1.5 trillion of temporary liquidity into the short-term funding markets, while the BoJ’s injected 500 billion yen into the system and announced an unscheduled buying of JGBs.

The latest developments boosted investors’ confidence and the same was evident from a strong rally across the global equity markets. In fact, the benchmark S&P 500 future hit an intraday up circuit breaker and was up 5% for the day.

It will now be interesting to see if the pair continues to show some resilience below the 1.2500 mark or some follow-through confirms a fresh near-term bearish breakdown, setting the stage for a further near-term depreciating move.

Technical levels to watch

 

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