- GBP / USD witnessed strong selling on Tuesday amid a strong rebound in USD demand.
- Rising US bond yields helped the USD rebound further from post-NFP lows.
- Technical selling below 1.3800 compounded bearish pressure around the pair.
Intraday selling around the pound accelerated during the mid-European session and dragged the pair down GBP/USD at three-day lows, around the 1.3770-65 region in the past hour.
After a modest intraday rally to the 1.3855 zone, the GBP / USD pair encountered fresh offers and fell for the second consecutive session on Tuesday. The drop pushed the pair away from the multi-week highs hit in reaction to Friday’s NFP release and was sponsored by a combination of factors.
The US dollar built on modest gains the day before and rebounded further from month-long lows amid a strong positive follow-up move in US Treasury yields. The benchmark 10-year US government bond surpassed 1.36% amid expectations that the Fed could begin reducing its pandemic-era stimulus in November.
On the other hand, the showdown between the UK and the EU on the way forward for the Northern Ireland Protocol could continue to act as a headwind for the British pound. This, in turn, was seen as another factor contributing to the GBP / USD intraday decline, leading to some short-term trading stops located near the 1.3800 round level.
The aforementioned handle coincided with the lower bound of a short-term rising channel extending from the August swing lows. A convincing break below could already have set the stage for further losses amid the absence of relevant economic data to move the market. Therefore, a subsequent decline towards the next relevant support, near 1.3700, seems like a clear possibility.
Technical levels
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