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  • GBP/USD extended the previous day’s retracement slide from YTD tops.
  • The USD built on the overnight bounce and prompted some profit-taking.
  • The downside seems limited ahead of BoE Governor Bailey’s testimony.

The GBP/USD pair weakened further below mid-1.3300s during the early European session and refreshed daily lows in the last hour, albeit lacked any strong follow-through.

The pair witnessed some selling during the first half of the trading action on Wednesday and extended the previous session’s retracement slide from the vicinity of the key 1.3500 psychological mark, or YTD tops. The US dollar built on the overnight recovery move from over two-year lows and was seen as one of the key factors exerting some pressure on the GBP/USD pair.

Data released on Tuesday showed that the US manufacturing sector activity accelerated to a nearly two-year high in August amid a surge in new orders and revived hopes for the economic recovery. This coupled with a modest pickup in the US Treasury bond yields provided an additional boost to the greenback and prompted some profit-taking around the GBP/USD major.

However, the Fed’s move to prioritize employment over inflation has raised speculations of more stimulus. This, in turn, could hold the USD bulls from placing any aggressive bets and help limit any deeper losses for the GBP/USD major. Investors might also prefer to wait on the sidelines ahead of the BoE Governor Andrew Bailey’s testimony before the Treasury Select Committee.

This makes prudent to wait for some strong follow-through selling before confirming that the recent strong bullish run might have already run out of the steam and positioning for any further corrective slide. Hence, any subsequent fall will be seen as an opportunity for bullish traders and limit the downside for the GBP/USD pair, at least for the time being.

Apart from this, traders on Wednesday will also take cues from the release of the ADP report on the US private-sector employment. The data might influence the USD price dynamics and produce some short-term trading opportunities later during the early North American session. The key focus, however, will remain on Friday’s release of the US monthly jobs report, popularly known as NFP.

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