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  • GBP/USD attracted some dip-buying on Monday and shot to multi-day tops in the last hour.
  • The uptick was led by cross-driven strength stemming from the EUR/GBP and the GBP/JPY.
  • The prevalent USD buying should cap the upside, instead prompt fresh selling at higher levels.

A sudden pickup in demand for the British pound pushed the GBP/USD pair to four-day tops, around the 1.3835 region during the early European session, albeit quickly retreated few pips thereafter.

Following an early slide to the 1.3755 region, the pair caught some aggressive bids and turned positive for the third consecutive session on Monday. The strong intraday momentum assisted the GBP/USD pair to build on last week’s bounce move from multi-week lows.

The uptick, however, lacked any obvious fundamental catalyst and could be solely attributed to some cross-driven strength. In fact, the EUR/GBP cross dived to the lowest level since February 2020 and the GBP/JPY cross rallied over 100 pips from intraday swing lows.

Apart from this, the latest leg of a sharp spike over the past hour or so was led by some technical selling on a sustained move beyond the 1.3800 round-figure mark. That said, the underlying bullish sentiment around the US dollar capped the upside for the GBP/USD pair.

Investors remained optimistic about the prospects for a relatively faster US economic recovery from the pandemic. This, along with a weaker trading sentiment around the US equity futures, benefitted the safe-haven USD and should keep a lid on any further gains for the GBP/USD.

Meanwhile, the ongoing EU/UK vaccination spat and the recent escalation of diplomatic tensions between the UK and China might also hold bulls from placing aggressive bets around the sterling. This, in turn, warrants some caution before positioning for any further appreciating move.

There isn’t any major market-moving economic data due for release on Monday, either from the UK or the US. Hence, any subsequent positive move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly amid the prevalent USD buying interest.

Technical levels to watch