GBP/USD: bulls looking to recover back to 1.3800, fade the rallies?

• GBP/USD bulls bouncing off key support.
• GBP/USD bulls looking for 1.3800 but mkt inclined to fade rallies.

Trading within a heavy trend to the downside on Brexit concerns, GBP/USD is catching a bid on dollar weakening off, ( after Federal Reserve chief Jerome Powell said he saw no signs of significant wage inflation as he testified before a Senate committee), and it is recovering from the session lows on a 30 pip bounce on the hourly sticks. Currently, GBP/USD is trading at 1.3746, down -0.14% on the day, having posted a daily high at 1.3781 and low at 1.3712.

GBP/USD has been the worst performing currency in the last couple of sessions on the back of hard Brexit fears where negotiations are proving problematic after the European Union presented a Brexit withdrawal draft that would create a hard border in Northern Ireland which was of course rejected by the UK officials, calling the proposal “absolutely unacceptable”.

UK PM May has been hosting EU's Tusk for lunch in London today. Headlines:

• Good progress had been made in reaching agreement on an implementation after meeting with European Council President Donald Tusk.
• The draft text put forward by the European Commission yesterday was unacceptable in meeting.
• She briefed Tusk on speech she will deliver tomorrow on the ambitious economic partnership that she hopes to agree with the EU.

Despite robust US data, with PCE prices, the Fed’s preferred measure of inflation that increased to 0.3% over the month, (unchanged at 1.5% on year-to-year basis), and US initial claims plummetting to a 48-year low of 210k, the US Dollar has come off its 6-week highs of 90.90 in the DXY and currently down to 90.60 -0.1% at the time of writing during the second part of Powell’s testimony where little new detail have emerged with respect to rates other than the, "no signs of significant wage inflation," statement. GBP/USD was better earlier after the UK Feb mfg PMI 55.2 vs 55.0 f/c. where 1.3800 resistance was eyed, the level bulls need to get on top of. 

Fade rallies?

Analysts at Scotiabank noted that some signs of bargain hunting buying had emerged overnight but argued that the near-term trend lower remains well-entrenched in the market and we rather expect more losses to fall, with the effective break under the 40-day MA this week area targeting a fall towards the mid/upper 1.35s. 

GBP/USD levels

Analysts at Commerzbank explained that GBP/USD’s outlook is negative it has eroded a band of support at circa 1.3782/1.3763 (55-day ma, the 9th February low and a 4-month uptrend). "Below here lies the 1.3658 September peak and the 1.3452 2016-2018 uptrend. A close below here is needed to confirm the end of the medium term up move (favoured). Resistance is provided by the 20 day ma at 1.3936 and the resistance line at 1.4066. While capped here, the outlook stays negative," the analysts argued.