- A modest USD profit-taking assisted GBP/USD to reverse an intraday dip to sub-1.3600 levels.
- Acceptance below 200-day SMA might have already set the stage for a further near-term decline.
- Any attempted recovery move is more likely to remain capped near the 1.3700 round-figure mark.
The GBP/USD pair once again showed some resilience below the 1.3600 mark and quickly recovered around 40-50 pips from the daily swing lows. The pair climbed back closer to the top end of its daily trading range, though lacked any follow-through buying and was last seen hovering around the 1.3630 region.
A generally positive risk tone – as depicted by a strong follow-through rally in the equity markets – prompted some profit-taking around the safe-haven US dollar. This, in turn, was seen as a key factor that extended some support to the GBP/USD pair. That said, the impasse over the Northern Ireland Protocol of the Brexit deal, along with the resurgence of the COVID-19 infections in the UK acted as a headwind for the British pound and capped gains.
From a technical perspective, the GBP/USD pair has found acceptance below the very important 200-day SMA for the first time since July 2020 and seems vulnerable to slide further. The pair, however, managed to find some support just ahead of February 2021 on Tuesday. This, coupled with the fact that RSI (14) on the daily chart has moved on the verge of breaking into the oversold territory, warrants some caution for aggressive bearish traders.
Hence, it will be prudent to wait for some consolidation or a modest bounce before positioning for any further depreciating move. In the meantime, any attempted recovery move might be seen as a selling opportunity and runs the risk of fizzling out rather quickly near the 1.3700 mark. This coincides with the 200-DMA support breakpoint and should now act as a key pivotal point and help determine the next leg of a directional move for the GBP/USD pair.
On the flip side, the 1.3570-60 region seems to have emerged as immediate support. A convincing break below will be seen as a fresh trigger for bearish traders and prompt some technical selling. The GBP/USD pair might then accelerate the fall further towards the key 1.3500 psychological mark. The downward trajectory could further get extended towards the next relevant support near the 1.3450-30 horizontal zone.