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- GBP/USD came under intense selling pressure on Tuesday amid a broad-based USD strength.
- Surging US bond yields, the risk-off impulse in the markets lifted the safe-haven greenback.
- Oversold RSI on the 1-hour chart warrants some caution for bearish traders ahead of Powell.
The GBP/USD pair added to its heavy intraday losses and dived to sub-1.3600s, or over two-month lows during the mid-European session.
Following an early uptick to the 1.3715 area, the GBP/USD pair witnessed aggressive selling on Tuesday and took along some short-term trading stops near the 1.3660-55 region. A combination of factors pushed the US dollar to the highest level since August 20, which, in turn, was seen as a key factor that exerted heavy pressure on the major.
The US Treasury bond yields prolonged the recent runaway rally amid prospects for an early policy tightening by the Fed. It is worth recalling that the Fed hinted last week that it will begin rolling back the massive pandemic-era stimulus as soon as November. Moreover, the dot plot indicated policymakers inclination to raise rates in 2022.
The upward pressure on the US bond yields continued acting as a tailwind for the buck. Apart from this, the risk-off impulse in the markets further boosted the greenback’s relative safe-haven status. Worries about China Evergrande Group’s unsolved debt crisis, along with the intensifying energy crisis in Europe and China took its toll on the risk sentiment.
Meanwhile, worries about supply bottlenecks in the United Kingdown weighed on the British pound and further contributed to the GBP/USD pair’s sharp intraday decline to the lowest level since July 21. That said, extremely oversold RSI on the 1-hour chart warrants some caution for aggressive traders and before positioning for any further depreciating move.
Market participants now look forward to Fed Chair Jerome Powell’s testimony before the Senate Banking Committee. This will be accompanied by the release of the Conference Board’s Consumer Confidence Index. Apart from this, the US bond yields and the broader market risk sentiment will influence the USD, allowing traders to grab some short-term opportunities around the GBP/USD pair.