GBP/USD Price Analysis: Recovers early lost ground, upside seems limited amid stronger USD

• GBP/USD reversed an intraday dip to sub-1.3800 levels amid a modest USD pullback from highs.
• Hawkish Fed expectations acted as a tailwind for the USD and kept a lid on any meaningful gains.
• A move beyond 1.3900 is needed to validate a move towards ascending trend-channel resistance.

The GBP/USD pair recovered over 40 pips from sub-1.3800 levels and climbed to the top end of its daily trading range, around the 1.3835-40 region heading into the North American session.

The risk-on impulse in the equity markets, along with a modest pullback in the US Treasury bond yields kept a lid on the intraday uptick for the safe-haven US dollar to two-week tops. This, in turn, was seen as a key factor that extended some support to the GBP/USD pair.

That said, expectations for an imminent Fed taper announcement should continue to act as a tailwind for the greenback and cap any meaningful upside for the GBP/USD pair. This makes it prudent to wait for some follow-through buying before positioning for any further gains.

Looking at the technical picture, the recent bounce from the 1.3600 mark has been along an upward sloping channel. Bulls, however, have struggled to capitalize on the move and repeatedly failed ahead of the 1.3900 mark, which should now act as a pivotal point for the GBP/USD pair.

Meanwhile, technical indicators on hourly/daily charts are holding with a mild positive bias but are yet to gain any meaningful traction. This further warrants some caution for bullish traders amid absent relevant market-moving economic releases, either from the UK or the US.

From current levels, any subsequent move up might continue to confront stiff resistance near the 1.3885-90 region. A sustained move beyond, leading to a subsequent breakthrough the 1.3900 mark will set the stage for an extension of a three-week-old upward trajectory.

The GBP/USD pair might then accelerate the momentum towards an intermediate hurdle, around the 1.3930 region en-route the 1.3955-60 supply zone. The momentum could eventually push the pair towards the top boundary of the ascending channel, currently near the key 1.4000 psychological mark.

On the flip side, the 1.3800 round figure now seems to protect the immediate downside ahead of the ascending channel support, around the 1.3775-70 region. A convincing break below might prompt aggressive technical selling and turn the GBP/USD pair vulnerable.

The next relevant support is pegged near the 1.3730-25 horizontal zone and the 1.3700 mark. Some follow-through selling below the 1.3680-75 region should pave the way for a slide back towards challenging August monthly swing lows, around the 1.3600 round-figure mark.

GBP/USD 4-hour chart

Technical levels to watch