- Resurgent USD demand sparked some aggressive selling around GBP / USD on Friday.
- The strong intraday decline managed to stagnate near the 100 DMA, around the 1.3670 region.
- The setup still favors bearish traders and supports the outlook for further weakness.
The pair GBP/USD witnessed some aggressive selling on the last trading day of the week and fell to more than two-month lows, around the 1.3670 region. A strong rally in US Treasury yields helped the US dollar rebound solidly from two-week lows. This, in turn, was seen as a key factor that put strong downward pressure on the GBP / USD pair.
Sustained weakness below 1.3700 further exacerbated the intraday bearish pressure. However, the GBP / USD pair managed to find some support near the 100-day SMA and rallied around 50 pips, although it lacked tracking. The pair now appears to have stabilized near the 50% Fibonacci level of the strong upward move of 1.3188-1.4243. This marks a congestion zone on the way to multi-year highs and should now act as a pivotal point for traders.
Meanwhile, the technical indicators on the daily chart maintained their bearish bias and are still far from being in oversold territory. The setup favors bearish traders and supports the outlook for additional short-term weakness. The GBP / USD pair remains vulnerable to breaking below 1.3600 and falling to test the 61.8% Fibonacci level, around the 1.3580-70 region. This is close to the February monthly swing lows and could limit any further decline.
That said, some subsequent selling would mark a further bearish breakout and drag the GBP / USD pair further towards the 1.3500 psychological level. The downward trajectory could extend towards the yearly lows, around 1.3450.
On the other hand, the 1.3730 area now appears to act as immediate resistance. Any subsequent upward movement could be seen as a selling opportunity and remain capped near the overnight swing highs, around the 1.3780 region. This is closely followed by the 1.3800 mark and the 38.2% Fibonacci level, around the 1.3820-25 region. A sustained move further will negate the bearish outlook and trigger some short-hedging move, pushing the GBP / USD pair to 1.3900.
Daily chart
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