GBP/USD finds some support just ahead of 1.1800 mark, not out of the woods yet

• GBP/USD witnessed some follow-through selling for the second successive day on Tuesday.
• Retreating US bond yields led to a modest USD pullback and helped limit any further losses.
• Traders now await Wednesday’s release of the monthly UK GDP print and the US CPI report.

The GBP/USD pair added to the previous day's heavy losses and witnessed some follow-through selling for the second successive day on Tuesday. The downward trajectory dragged spot prices to the lowest level since March 2020, though stalled just ahead of the 1.1800 round-figure mark.

The US dollar trimmed a part of its intraday gains to a fresh two-decade high amid a further decline in the US Treasury bond yields, pressured by the global flight to safety. Modest intraday USD pullback was seen as a key factor that offered some support to the GBP/USD pair, though any meaningful recovery still seems elusive.

Growing acceptance that the Fed would retain its aggressive policy tightening path, despite fears about a possible recession, should continue to act as a tailwind for the buck. In fact, the minutes of the June 14-15 FOMC meeting released last week emphasized the need to fight inflation even if it results in an economic slowdown.

Adding to this, Atlanta Fed President Raphael Bostic said that the US economy can cope with higher interest rates and reiterated his support for another interest rate hike at the July FOMC meeting. Hence, the market focus will remain glued to the release of the latest US consumer inflation figures, due on Wednesday.

In the meantime, the prevalent risk-off environment should underpin the greenback's relative safe-haven status. Apart from this, worries that the UK government's controversial Northern Ireland Protocol Bill could trigger a trade war with the European Union and expectations for a less hawkish Bank of England should cap the GBP/USD pair.

The fundamental backdrop supports prospects for a further near-term depreciating move, through traders might prefer to wait on the sidelines ahead of the key macro data from the UK and the US. The monthly UK GDP report is scheduled to be published on Wednesday and would be followed by the latest US consumer inflation figures.

This week's US economic docket also highlights the release of monthly Retail Sales data and Prelim Michigan Consumer Sentiment on Friday, which will influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment to determine the next leg of a directional move for the GBP/USD pair.

Technical levels to watch