- GBP / USD came under intense selling pressure on Tuesday amid widespread USD strength.
- Rising US bond yields, the risk aversion momentum in the markets lifted the safe-haven dollar.
- The oversold RSI on the 1 hour chart warrants some caution for bearish traders ahead of Powell.
The pair GBP/USD it added to its strong intraday losses and fell below 1.3650 or above two-month lows during the middle of the European session.
After an early rally to the 1.3715 area, the GBP / USD pair witnessed an aggressive sell on Tuesday and took some short-term trading stops near the 1.3660-55 region. A combination of factors pushed the US dollar to the highest level since August 20, which, in turn, was seen as a key factor that put heavy pressure on the pair.
US Treasury yields prolonged the recent rally amid prospects for an early policy tightening by the Fed. It’s worth remembering that the Fed hinted last week that it will begin to roll back. the massive stimulus of the pandemic era beginning in November. In addition, the dot plot indicated the inclination of policy makers to increase rates in 2022.
Upward pressure on US bond yields continued to act as a tailwind for the dollar. Aside from this, risk aversion in the markets further boosted the dollar’s relative safe-haven status. Concerns about China’s Evergrande Group’s unresolved debt crisis, along with the intensification of the energy crisis in Europe and China, took a toll on risk sentiment.
Meanwhile, concerns over UK supply bottlenecks weighed on the British pound and further contributed to the GBP / USD sharp intraday slide to the lowest level since July 21. That said, the extremely oversold RSI on the 1 hour chart warrants some caution for aggressive traders and before positioning for any further depreciation moves.
Market participants are now looking forward to Fed Chairman Jerome Powell’s testimony before the Senate Banking Committee. This will be accompanied by the publication of the Conference Board Consumer Confidence Index. Apart from this, US bond yields and general market risk sentiment will influence the USD, allowing traders to seize some short-term opportunities around the GBP / USD pair.