GBP/USD: Remains Vulnerable Near Multi-Month Lows
A goodish pickup in the US bond yields extended some support to the USD and capped gains.
Fed rate cut expectations should limit any meaningful USD uptick and help limit the downside.
Investors might refrain from placing fresh bets ahead of Tuesday’s UK monthly jobs report.
The GBP/USD pair failed to capitalize on last week's goodish bounce from six-month lows and traded with a mild negative bias through the early European session on Monday. A strong follow-through pickup in the US Treasury bond yields extended some support to the US Dollar, which eventually turned out to be one of the key factors that kept a lid on the pair's recent corrective bounce. However, firming market expectations that the Fed will cut interest rates later this July - reinforced by last week's comments by the Fed Chair Jerome Powell and Chicago Fed president Charles Evans, should keep the USD bulls on the defensive and help limit any meaningful downside.
Investors might also refrain from placing any aggressive bids amid absent relevant market moving economic releases from the UK. Later during the early North-American session, the US economic docket - featuring the release of Empire State Manufacturing Index, followed by a scheduled speech by New York Fed President John Williams will now be looked upon for some short-term trading opportunities. The key focus, however, will remain on Tuesday's key release of the UK monthly jobs report, which may partly keep attention away from Brexit and provide some meaningful impetus. In the meantime, the pair seems more likely to extended its consolidative price action and remain confined in a narrow trading band around 38.2% Fibo. level of the 1.2784-1.2440 recent downfall.
From a technical perspective, any subsequent up-move now seems to confront some fresh supply near the 1.2600 handle, above which a fresh bout of short-covering has the potential to continue lifting the pair further towards 61.8% Fibo. level - around the 1.2650 region en-route the 1.2700 round figure mark. Alternatively, a sustained weakness back below the key 1.2500 psychological mark, leading to a subsequent break through the 1.2480 horizontal area might turn the pair vulnerable to accelerate the slide towards the recent swing lows support near the 1.2440 region.
A follow-through selling will point to the resumption of the well-established downtrend and pave the way for a move back towards challenging yearly lows, around the 1.2400-1.2395 area. The latter nears the lower end of a four-month-old descending trend-channel, which if broken will confirm a fresh bearish breakdown and open the room for a further near-term depreciating move.
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