- GBP/USD gains some positive traction on Wednesday, although it lacks follow-through.
- Risk appetite momentum is undermining the safe haven dollar and offering support.
- Rising US bond yields help limit dollar losses and keep additional gains in check.
- Investors also appear hesitant ahead of Thursday’s BoE and Friday’s NFP.
The pair GBP/USD defends support marked by the lower end of an almost three week ascending channel and attracts some buying near the 1.2135 region on Wednesday.
The risk appetite boost, represented by a generally positive tone around equity markets, undermines the safe haven of the US dollar and offers some support to the GBP/USD pair. However, a further rise in US Treasury yields, bolstered by comments from several Fed officials on Tuesday, help limit dollar losses.
The GBP/USD pair, meanwhile, is struggling to find acceptance above the 1.2200 round figure and remains at the mercy of the dollar’s price dynamics. Traders now look to the US services PMI for further momentum, though attention will turn to Thursday’s Bank of England meeting and Friday’s monthly US employment report (NFP). .
Meanwhile, uptrend channel support near the 1.2135 area could continue to protect the immediate downside. A convincing break below could spark some technical selling and drag GBP/USD to test the 1.2100 mark. On the 4-hour chart, the 200-period SMA is close behind.
Some selling below the latter would be seen as a new trigger for bearish traders and make GBP/USD vulnerable. The decline could then accelerate towards the intermediate support of 1.2030-1.2025 towards the psychological level of 1.2000 and the next relevant support near the horizontal zone of 1.1975-1.1970.
On the other hand, 1.2200 seems to act as an immediate hurdle, above which GBP/USD could rally back to the 1.2250 resistance. Sustained strength beyond the latter should pave the way for an extension of the recent recovery from the lowest level since March 2020 and allow the pair to aim to conquer the 1.2300 level.
GBP/USD 4-hour chart
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Technical levels
Source: Fx Street
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