- GBP/USD witnessed an intraday turnaround after the initial uptick to fresh 32-month tops.
- A sharp fall in the equity markets benefitted the safe-haven USD and exerted some pressure.
- Wednesday’s focus will be on the FOMC decision and Jerome Powell’s post-meeting presser.
The GBP/USD pair extended its retracement slide from multi-month tops and refreshed daily lows in the last hour, with bears now looking to extend the momentum further below the 1.3700 mark.
The pair failed to capitalize on its early uptick to the highest level since May 2018 and witnessed an intraday turnaround from the 1.3755-60 region amid resurgent US dollar demand. The optimism over the rollout of COVID-19 vaccines and prospects for a strong global economic recovery now seemed to have faded. This, along with doubts about the timing and size of the new US economic stimulus plan, dampened the market mood.
Apart from this, escalating US-China tensions in the South China Sea further took its toll on the global risk sentiment. This was evident from a sharp fall in the equity markets, which, in turn, forced investors to take refuge in the safe-haven greenback. The strong intraday USD move up could further be attributed to some repositioning trade ahead of the FOMC monetary policy meeting, due later during the US session on Wednesday.
The Fed is widely expected to leave monetary policy settings unchanged. Hence, the key focus will be on the accompanying monetary policy statement and the Fed Chair Jerome Powell's comments at the post-meeting press conference. Traders might further take cues from the US stimulus headlines and developments surrounding the coronavirus saga. In the meantime, the release of US Durable Goods Orders data will be looked upon for some trading opportunities.
Meanwhile, the GBP/USD pair has now eroded a part of the previous day's strong intraday rally of around 135 pips from the vicinity of the 1.3600 round-figure mark. Any subsequent fall is likely to find some support near the 1.3575 horizontal level, which if broken decisively might prompt some technical selling and pave the way for an extension of the corrective pullback. This, in turn, might drag the pair back towards the key 1.3500 psychological mark.
Technical levels to watch
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