British Pound edges lower as USD steadies above three-month low; downside seems limited

The GBP/USD pair edges lower during the Asian session on Thursday and retreats further from its highest level since May 11, touched the previous day. Spot prices slip below the 1.3600 mark in the last hour, though the fundamental backdrop seems tilted in favor of bulls and backs the case for the emergence of some dip-buying.

The US Dollar (USD) stabilized following the previous day's US bond yields-led slump to a three-month low and turns out to be a key factor acting as a headwind for the GBP/USD pair. The decline in yields came after the US Treasury Department stepped in to provide relief to bond markets and said it would at least double its purchases of longer-dated government debt starting in September.

However, hawkish FOMC Minutes, showing broader support for rate increases, help limit further USD losses amid persistent geopolitical uncertainties stemming from the US-Iran standoff over the Strait of Hormuz. In the latest development surrounding the Middle East crisis, US President Donald Trump said on Wednesday that Washington will impose stricter economic restrictions on Iran.

The British Pound (GBP), on the other hand, draws some support from Wednesday's hot UK consumer inflation figures, which reaffirmed bets for at least one quarter-point interest rate hike by the Bank of England (BoE) before the end of the year. This, in turn, validates the positive outlook for the GBP/USD pair and should hold back bearish traders from positioning for any corrective slide.

Investors now look to the US economic docket – featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims data. Apart from this, speeches from influential FOMC members will drive the USD and provide some impetus to the GBP/USD pair. Furthermore, the incoming geopolitical headlines might contribute to infusing volatility in financial markets.

GBP/USD daily chart

Technical Analysis

The GBP/USD pair’s stance above the 100-day Simple Moving Average (SMA) at 1.3427. suggests a supportive bullish bias. The said support should act as the primary structural cushion in case of a corrective pullback. As long as spot prices hold above this level, the prevailing uptrend could aim to test May swing high near 1.3655.