GBP/USD witnessed fresh selling on Thursday and reversed the previous day’s positive move.
Resurgent USD demand was seen as a key factor that exerted downward pressure on the pair.
Mixed technical indicators on hourly/daily charts warrant some caution for aggressive traders.
The GBP/USD pair continued losing ground through the first half of the European session and dropped to the 1.3810 region, or fresh daily lows in the last hour.
Resurgent US dollar demand was seen as a key factor that prompted fresh selling around the GBP/USD pair on Thursday. Despite signs of inflationary pressure in the US, investors seem convinced about an imminent Fed taper announcement later this year. This, along with a modest pickup in the US Treasury bond yields and the prevalent cautious mood, underpinned the safe-haven greenback.
Looking at the technical picture, the GBP/USD pair has now reversed the overnight bounce from sub-1.3800 levels, or weekly lows and was last seen hovering near the 200-period SMA on the 4-hour chart. This is closely followed by support marked by the lower end of an ascending channel, extending from August monthly swing lows, which should now act as a key pivotal point for traders.
Meanwhile, oscillators on hourly charts have been gaining negative traction but are yet to confirm a bearish bias on the daily chart. This makes it prudent to wait for a convincing break below the channel support, currently around the 1.3785 area, before positioning for any further decline. The GBP/USD pair might then slide to the 1.3735 intermediate support en-route the 1.3700 mark.
On the flip side, the 1.3850-55 region now seems to have emerged as immediate strong resistance. This is followed by the 1.3885-90 supply zone and the 1.3900 mark, which if cleared decisively will negate the negative outlook. Some follow-through buying beyond the mentioned hurdles will set the stage for a move beyond mid-1.3900s, towards reclaiming the key 1.4000 psychological mark.