GBP/USD surrenders early gains to fresh multi-year tops, retreats to 1.3730 area

• GBP/USD struggled to capitalize on its intraday positive move to fresh 32-month tops.
• A softer risk tone benefitted the safe-haven USD and capped the upside for the major.
• Investors eye US Durable Goods Orders for some impetus ahead of the FOMC decision.

The GBP/USD pair faded an early European session spike to fresh 32-month tops and has now retreated to the lower end of its daily trading range. The pair was last seen hovering around the 1.3730 region, nearly unchanged for the day.

The pair built on the overnight strong rally of around 135 pips from the vicinity of the 1.3600 mark and gained some follow-through traction through the first half of the trading action on Wednesday. The momentum pushed the GBP/USD pair to the highest level since May 2018, around the 1.3755-60 region, though lacked any strong follow-through buying.

A softer tone surrounding the equity markets underpinned the US dollar's safe-haven status, which, in turn, was seen as one of the key factors that capped the upside for the GBP/USD pair. Investors remain worried about the potential economic fallout from the ever-increasing coronavirus cases and the imposition of fresh restrictions to curb infections.

Apart from this, doubts over the timing and size of a new US fiscal stimulus package, along with escalating US-China in the South China Sea, further dampened the mood. Meanwhile, the risk-off mood was evident from sliding US Treasury bond yields, which might hold the USD bulls from placing fresh bets and help limit loses for the GBP/USD pair.

Investors might also prefer to stay on the sidelines ahead of the latest FOMC monetary policy decision, due to be announced later during the US session on Wednesday. This makes it prudent to wait for some strong follow-through selling before traders start positioning for any meaningful corrective slide for the GBP/USD pair.

Heading into the key event risk, the release of the US Durable Goods Orders data will be looked upon for some impetus. Traders might further take cues from the broader market risk sentiment and developments surrounding the coronavirus saga, which might influence the USD price dynamics and produce some short-term opportunities.

Technical levels to watch