- GBP / USD extends the previous day’s retracement decline from the ascending channel resistance.
- A rally in US bond yields and risk-off sentiment benefit the USD and put some pressure on the pair.
- Any significant decline could be seen as a buying opportunity and is likely to remain limited.
The GBP / USD pair has seen some selling on Wednesday and has returned some of the strong positive movement of the previous day to the highest level since the end of February, around the 1.4220 region.
A strong recovery in US Treasury yields has allowed the US dollar to rebound well from multi-month lows. Aside from this, a sharp drop in equity markets has further bolstered the safe-haven USD. This, in turn, has been seen as a key factor that has put downward pressure on the GBP / USD pair.
On the technical outlook, recent strong positive momentum has stopped near resistance marked by the upper bound of an upward sloping channel extending from the March / April lows. The mentioned hurdle would now act as a fundamental point and should help investors determine the next directional move for the GBP / USD pair.
The GBP / USD pair, for now, appears to have broken three consecutive days of winning streak and is trading around the 1.4160-50 region. The next relevant support on the downside is near the 1.4100 level. Any subsequent decline could be seen as a buying opportunity and could remain capped near 1.4050.
Lower they await the lows of last week, around the 1.4000-1.3990 region, below which the GBP / USD pair could accelerate the decline to test the support of the ascending channel, near 1.3950. Sustained weakness below this region will negate any short-term positive bias and could spark some aggressive technical selling, making the pair vulnerable.
On the other hand, the 1.4190-1.4200 region now appears to limit the immediate rally ahead of the resistance of the ascending channel, currently around the 1.4225-35 area. The aforementioned barrier coincides with the annual highs hit in February, which if decisively broken will mark a new bullish breakout and will set the stage for a new short-term bullish move.
GBP / USD 4 hour chart
GBP / USD technical levels
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