GBP/USD - Inside day, yield spread at 10-month high

• Inside day candle on Monday.
• Today's candle to decide the trend.
• 10Y US-UK yield spread rises in GBP-negative manner.

The short-term bias in the GBP/USD pair will be determined by the price action today.

A positive follow-through to yesterday's inside day candle would indicate the pullback from 1.3550 (Dec. 1 high) has ended. The pair could then witness a bull flag breakout. On the other hand, negative price action today would confirm bearish continuation, i.e. revival of the sell-off from the Dec. 1 high of 1.3550.

That said, the 10-year US-UK bond yield differential indicates the pair could drop today. The spread rose to 125.15 basis points; the highest level since Apr. 10.

However, the spread may narrow in the USD negative/GBP positive manner if the US housing numbers disappoint expectations by a big margin.

GBP/USD Technical Levels

FXStreet Chief Analyst Valeria Bednarik writes, "the pair continues developing inside a descendant channel, with the roof of the figure currently around 1.3435. In the 4 hours chart, the price settled a few pips above its 20 SMA, while technical indicators have recovered some ground, but the Momentum indicator remains within negative territory, with moderate upward strength, while the RSI indicator lost its strength upwards once surpassing its mid-line. The pair bottomed again around the 1.3300 level at the beginning of the day, making of it a line on the sand for bulls for the upcoming sessions."

Support levels: 1.3380 1.3345 1.3310

Resistance levels: 1.3400 1.3435 1.3480