GBP/USD holds above 1.3700, looking vulnerable

• Pound holds onto recent recovery amid a correction of the dollar.
• GBP/USD heads for the lowest close since early February.

The GBP/USD bottomed earlier on Wednesday at 1.3673, the lowest intraday level in two months, and then rebounded, trimming losses. The recovery found resistance around the 1.3730 area. Cable remains above 1.3700, off lows but still under pressure.

A correction of the US dollar and rising equity prices in Wall Street offered support to the GBP/USD on Wednesday. The DXY is still in positive for the day but off highs and below 92.50 (large positive impulse from the USD/JPY rally).

Higher US yields continue to limit any pullback of the greenback. The 10-year bottomed near 1.59% and then rose to 1.65%. Some relief probably came from weaker-than-expected data in the US (Markit PMI and durable goods orders). Yellen and Powell will present testimony again before a Senate committee, with market participants expecting no surprises.

From a technical perspective, the negative bias in GBP/USD remains intact. A decline back below 1.3700 would expose recent lows at 1.3670/75; below the next support stands at 1.3640. On the upside, the strong barrier is seen at 1.3800.

Technical levels