**GBP/USD Shrugs Off Bearish Momentum, Recovers 1.3400 Region**
*Based on content by FXStreet News Team, attribution as per source.*
The GBP/USD currency pair showcased its resilience in recent trading sessions, bouncing back above the 1.3400 mark after a period of bearish momentum. The pair, which had been under downward pressure amid a combination of fundamental and technical factors, is now demonstrating renewed volatility that invites close attention from traders and investors. This article delves into the underlying catalysts driving the pair’s recovery, examines technical and fundamental influences, and outlines possible scenarios for the near term.
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**Recent Price Action Recap**
The British pound’s performance against the US dollar has been a focal point for forex traders. Earlier, the GBP/USD pair extended its slide amid growing concerns over economic uncertainty in the UK as well as hawkish sentiment surrounding the US Federal Reserve. However, as the session progressed, the pair found strong buying interest near the 1.3350 region, which ignited a rebound past the 1.3400 level.
Key highlights of recent price action include:
– The pair marked intraday lows close to 1.3340.
– Reversal began amid emerging risk-on sentiment during the US session.
– GBP/USD overcame resistance levels to reclaim territory above the 1.3400 psychological threshold.
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**Fundamental Drivers Behind the Rebound**
Several core factors contributed to the pair’s recovery:
**1. US Dollar Moderation**
– The greenback lost some upward steam after a sharp advance earlier in the week.
– Shifts in US Treasury yields, pausing their climb, offered respite for riskier currencies like the British pound.
– Market expectations regarding Federal Reserve tapering and interest rate hikes were largely priced in, leading to profit-taking on long dollar positions.
**2. Improved Risk Sentiment**
– Global markets experienced a mild recovery, buoyed by US equity gains and signs of easing in supply bottlenecks.
– Risk appetite returned, with investors favoring higher-yielding and cyclically sensitive currencies.
– Diminished risk aversion typically undermines traditional safe-haven flows into the US dollar.
**3. UK Economic Developments**
– Some positive signals from UK economic data helped underpin the pound’s recovery.
– The labor market continues to show signs of tightness, fueling expectations for a Bank of England interest rate move in the future.
– The UK government’s updated Covid-related measures suggested cautious optimism for continued economic reopening.
**4. Central Bank Dynamics**
– Market participants continued to gauge future policy actions by both the Bank of England and the US Federal Reserve.
– No significant surprises from either side allowed existing currency positions to unwind, favoring a technical correction in GBP/USD.
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**Technical Analysis: GBP/USD’s Pathway Higher**
A close look at GBP/USD’s technical landscape provides a clearer picture of immediate resistance, support, and path forward.
**Key Technical Levels**
– **Immediate resistance:** 1.3420–1.3440 region. Sustained move above this zone could target stronger resistance near 1.3480 and then 1.3520.
– **Initial support:** 1.3360, with further backing at 1.3320 and the critical 1.3300 figure, coinciding with recent swing lows.
– **Trend indicators:** The 50-period and 100-period moving averages are converging near current price, suggesting a pivotal battle between bulls and bears.
**Technical Patterns**
– Recent candlestick formations show a potential bullish reversal, with long lower wicks indicative of buyers stepping in at lows.
– Relative Strength Index (RSI) bounced from oversold conditions, signaling that downside momentum is waning.
– The MACD histogram is flattening, implying a potential trend change if momentum continues to shift in favor of bulls.
**Scenarios for the Pair**
– **Bullish scenario:** A daily close above 1.344
Read more on GBP/USD trading.