GBP / USD flirts with session lows, remains depressed below 1.3750

  • The sustained buying of the USD put some pressure on the GBP / USD for the second day in a row.
  • The optimistic US economic outlook and rising US bond yields continued to prop up the USD.
  • The setup favors bearish traders and supports the outlook for a dip to test the 100-day SMA.

The pair GBP/USD it remained depressed for the middle of the European session and was last seen hovering near the lower end of its daily trading range, below 1.3750.

The pair was unable to capitalize on its initial rally, instead finding a new trading zone near the 1.3780-85 region and moving down into negative territory for the second consecutive session on Tuesday. The intraday decline was solely sponsored by the strong bullish sentiment prevailing around the US dollar.

The USD continued its recent bullish momentum and soared to four-month highs amid prospects for a relatively faster US economic recovery from the pandemic. Investors remained optimistic about the outlook for the US economy amid the impressive pace of vaccination against the coronavirus and the passage of a massive stimulus package.

Added to this, expectations of an additional $ 3.0 trillion to $ 4 trillion infrastructure spending plan from the Biden Administration have been driving reflation trading. This, coupled with a strong rally in US Treasury yields, provided an additional boost to the dollar and put some pressure on the GBP / USD pair.

That said, a highly successful vaccine distribution program and the easing of some lockdown restrictions in England could extend some support to the British pound. This, in turn, could help limit the decline in the GBP / USD pair, so it is wise to wait for some follow-up selling before placing any new bearish bets.

Looking at the technical picture, acceptance below confluence support near the mid-1.3700 may already have laid the groundwork for further weakness. Therefore, any recovery attempt could be considered a selling opportunity. The GBP / USD pair now looks vulnerable to break below 1.3700 and test the 100-day SMA support near the 1.3630-25 region.

The next step will be the publication of the Conference Board’s US Consumer Confidence Index. This, along with US bond yields, will influence USD price dynamics and produce some short-term trading opportunities around the GBP / USD pair.

Technical levels

.

You may also like