- An overall strength around the USD continues to put some pressure around GBP / USD on Tuesday.
- A sustained break below the 1.3900 level could have turned the bias in favor of the bears.
Buying interest around the USD has accelerated at the start of the European session on Tuesday and has dragged the GBP / USD pair to a week and a half lows, around the 1.3865 region.
The pair has extended the rejection drop of the previous day, from the key psychological level of 1.4000, and has seen some continuation selling during the first half of the trading action on Tuesday. The fall is due exclusively to a general strength of the US dollar amid rising expectations for a relatively faster US economic recovery from the pandemic.
Rhythm Impressive Vaccination for COVID-19 and Progress on America’s Massive Fiscal Spending Plan It has been driving the reflation trade. The scene of a strong recovery has been seen bolstered by the release of the US ISM Manufacturing PMI, which jumped to its highest level in three years at 60.8 in February and has been seen as a key factor that has continued to prop up the US dollar.
Apart of this, Softer risk sentiment has further benefited the safe-haven USD and has further contributed to the current decline in the GBP / USD pair to the lowest level since February 18. Risk-off sentiment has been bolstered by a modest pullback in US Treasury yields, although they have done little to affect bullish sentiment surrounding the dollar.
In the meantime, the inability of the GBP / USD pair to attract significant buying interest suggests that most of the positive news is already fully discounted at the market price. Added to this, the sustained weakness below the 1.3900 level may already have turned the bias in favor of the bears and supports the prospects for an extension of the corrective slide.
Therefore, some continuation weakness, towards the next relevant support near the 1.3815 region, now seems like a clear possibility. There is no major economic data release on Tuesday, either from the UK or the US, leaving GBP / USD at the mercy of USD price dynamics and overall market risk sentiment.
GBP / USD technical levels
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