GBP/USD bounces off weekly lows, lacks follow-through

• GBP/USD reversed an intraday dip to weekly lows, around the 1.3730 region.
• Uncertainty over the Fed’s policy move capped the USD and extended support.
• The recent rise in COVID-19 cases in the UK kept a lid on any further gains.

The GBP/USD pair struggled to capitalize on its modest intraday bounce from weekly lows and was last seen trading in the neutral territory, around mid-1.3700s.

The pair extended the previous day's rejection slide from the very important 200-day SMA – levels just above the 1.3800 mark – and edged lower during the first half of the trading action on Wednesday. The recent spike in new COVID-19 cases in the UK continued acting as a headwind for the British pound. Apart from this, a modest US dollar strength was seen as another factor that exerted some pressure on the GBP/USD pair.

The US Treasury bond yields built on the overnight strong rebound and gained some follow-through traction on Wednesday, which extended some support to the greenback. That said, uncertainty about the likely timing of the Fed's tapering plan and fading hopes for an early lift-off kept a lid on any strong gains for the buck. This, in turn, assisted the GBP/USD pair to attract some buying near the 1.3730 region.

Meanwhile, the lack of any strong follow-through strength warrants some caution for aggressive bullish traders. Hence, it will be prudent to wait for some strong follow-through buying before positioning for any meaningful intraday appreciating move. Market participants now look forward to the US economic docket, featuring the releases of the ADP report on private-sector employment and ISM Manufacturing PMI for some impetus.

Technical levels to watch