GBP/USD eases from tops, up little around 1.3720-25 area

• The ongoing USD retracement slide assisted GBP/USD to build on the overnight positive move.
• Uncertainty about the Fed’s tapering plan, the risk-on impulse weighed on the safe-haven USD.
• The market focus will remain glued to Fed Chair Powell’s speech at Jackson Hole Symposium.

The GBP/USD pair reversed an intraday dip to sub-1.3700 levels and was last seen trading with modest intraday gains, around the 1.3720-25 region.

The pair built on the previous day's strong recovery move from the vicinity of the 1.3600 mark, or one-month lows and gained some traction during the early part of the trading action on Tuesday. The momentum was exclusively sponsored by the ongoing US dollar retracement slide, though lacked any follow-through and faltered near mid-1.3700s.

Investors now seemed to have pushed back their expectations about the likely timing when the Fed will begin rolling back its pandemic-era stimulus amid the worsening COVID-19 situation in the US. In fact, the US registered the highest number of new cases since January on Monday. This, along with the risk-on impulse, undermined the safe-haven greenback.

The global risk sentiment got a lift after China said that it had stopped the community spread of COVID-19. This might have restored some confidence in China's growth dynamics for the rest of the year. Apart from this, the full approval of the Pfizer/BioNTech COVID-19 vaccine further boosted investors' appetite for perceived riskier assets.

That said, a modest pickup in the US Treasury bond yields helped limit any deeper losses for the greenback. Investors also seemed reluctant to place any aggressive bets ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. This, in turn, seemed to be the only factor that kept a lid on any further gains for the GBP/USD pair.

Market participants now look forward to the US economic docket, featuring the second-tier releases of New Home Sales and Richmond Manufacturing Index. The data is unlikely to provide any meaningful impetus, though the broader market risk sentiment might influence the USD price dynamics and produce some trading opportunities around the GBP/USD pair.

Technical levels to watch