GBP/USD refreshes session lows, slides further below mid-1.4100s

• GBP/USD retreated around 35 pips from daily swing highs amid a modest USD bounce.
• An uptick in the US bond yields provided some respite to the USD bulls, at least for now.
• The downside seems limited, warranting some caution before positioning for a sharp fall.

The GBP/USD pair witnessed some selling during the early European session and dropped to fresh daily lows, around the 1.4135 region in the last hour.

The pair struggled to capitalize on its modest uptick, instead met with some fresh supply near the 1.4170 area and has now retreated around 35 pips from daily tops. In the absence of a fresh fundamental catalyst, the pullback could be solely attributed to a modest US dollar rebound and some cross-driven weakness stemming from the EUR/GBP cross.

The greenback found some support from an uptick in the US Treasury bond yields, though expectations that the Fed will retain its ultra-lose policy stance for a longer period capped gains. Various FOMC officials reiterated that any spike in prices is more likely to be temporary and helped ease worries about runaway inflation in the US.

Investors now seem convinced with the Fed's stubbornly dovish view, which, in turn, led to the recent sharp fall in the US bond yields. In fact, the yield on the benchmark 10-year US government bond dropped to 1.56%, or multi-week lows on Tuesday, which along with softer US consumer confidence data dragged the USD Index to its lowest level since January.

On the other hand, the optimistic outlook for the UK economic recovery from the pandemic might continue to lend some support to the British pound. This might further act as a tailwind for the GBP/USD pair and help limit any meaningful slide amid absent relevant market-moving economic releases, either from the UK or the US.

From a technical perspective, the good two-way price moves since the beginning of this week point to indecision over the GBP/USD pair's near-term trajectory. This further warrants some caution before placing any aggressive bets and positioning for any firm direction.

Technical levels to watch