GBP/USD Price Analysis: Refreshes daily tops, 1.3800 mark back in sight

• GBP/USD gained positive traction on Thursday and recovered further from one-week lows.
• The ascending channel breakdown seems to have shifted bias in favour of bearish traders.
• Follow-through weakness below the 1.3700 mark is needed to confirm the negative outlook.

The GBP/USD pair built on the previous day's recovery move from the 1.3700 neighbourhood, or over one-week lows and edged higher through the first half of the trading action on Thursday. The momentum pushed the pair fresh daily tops, around the 1.3770-75 region during the early European session.

The British pound was underpinned by the UK finance minister Rishi Sunak's upbeat economic assessment during the annual budget presentation on Wednesday. Adding to this, expectations for an imminent interest rate hike move by the Bank of England further acted as a tailwind for the sterling. This, along with a subdued US dollar price action, provided a modest lift to the GBP/USD pair.

That said, a goodish pickup in the US Treasury bond yields helped limit the USD losses and kept a lid on any meaningful gains for the GBP/USD pair. Investors also seemed reluctant to place aggressive bets and preferred to wait for the outcome of the highly-anticipated ECB meeting. Apart from this, the Advance US Q3 GDP report will be looked upon for some meaningful trading opportunities.

Looking at the technical picture, the recent strong rally from the vicinity of the 1.3400 mark touched in September faltered near a descending trend-line extending from late July. The subsequent pullback dragged the GBP/USD pair below support marked by the lower boundary of a one-month-old ascending channel on Wednesday. This might have already set the stage for a further depreciating move.

Meanwhile, technical indicators on the daily chart – though have been losing positive momentum – are yet to confirm a bearish bias. This, along with the emergence of dip-buying at lower levels, warrants some caution for bearish traders. Hence, it will be prudent to wait for some follow-through selling below the 1.3700 round-figure mark before positioning for an extension of the downfall.

The GBP/USD pair might then accelerate the downward momentum towards testing the next relevant support near mid-1.3600s before eventually dropping to test sub-1.3600 levels in the near term.

On the flip side, any subsequent positive move is more likely to meet with some fresh supply near the 1.3800 mark and remain capped near the descending trend-line resistance, around 1.3825-30 region. This is closely followed by the very important 200-day SMA, around mid-1.3800s, which if cleared decisively will negate any near-term negative bias and be seen as a fresh trigger for bullish traders.

The GBP/USD pair might then accelerate the momentum towards the 1.3900 round-figure mark. Some follow-through buying has the potential to push the pair further towards the 1.3960-65 resistance, above which bulls could aim to reclaim the key 1.4000 psychological mark.

GBP/USD daily chart

Technical levels to watch