GBP/USD Price Analysis: Seems vulnerable, sustained break below mid-1.3100s awaited

• GBP/USD witnessed some follow-through selling for the second successive day on Thursday.
• The risk-on impulse capped the safe-haven USD and helped limit deeper losses for the major.
• The set-up favours bearish traders and supports prospects for a further depreciating move.

The GBP/USD pair witnessed some follow-through selling for the second straight day on Thursday and retreated further from a nearly three-week high, around the 1.3300 mark touched overnight. The downward trajectory dragged spot prices to a two-day low, though stalled ahead of mid-1.3100s.

A generally positive tone around the equity markets capped gains for the safe-haven US dollar, which, in turn, was seen as a key factor that extended some support to the GBP/USD pair. That said, elevated US Treasury bond yields, bolstered by the Fed's hawkish outlook, acted as a tailwind for the buck and failed to assist the pair to register any meaningful recovery.

From a technical perspective, oscillators on the daily chart are still holding in the bearish territory and support prospects for further losses. Some follow-through selling below the 1.3150 area will reaffirm the negative outlook and make the GBP/USD pair vulnerable to retest sub-1.3100 levels, touched in reaction to a dovish assessment of the BoE decision last week.

Acceptance below the 1.3100 round figure will suggest that the recent recovery move from the YTD low has run its course. This, in turn, will set the stage for the resumption of the prior well-established bearish trend witnessed over the past one month or so. The GBP/USD pair could then accelerate the downfall and aim to challenge the key 1.3000 psychological mark.

On the flip side, sustained strength back above the 1.3200 mark might trigger a short-covering move and lift the GBP/USD pair back towards the 1.3255-1.3260 region. Some follow-through buying could allow bulls to make a fresh attempt to conquer the 1.3300 round-figure mark and lift spot prices to the next relevant resistance near the 1.3320-1.3325 region.

GBP/USD 4-hour chart

Technical levels to watch