GBP/USD rebounds from 1.3500 as USD losses strength

• Cable finds support above 1.3500. 
• Greenback ends day higher as US yields reach multi-month highs. 

The GBP/USD moved off daily lows during the US session but it was still headed toward a decline.  A stronger US Dollar pushed the pair to the downside but during the American session it trimmed losses and managed to hold above the 1.3500 region. 

Yields boost USD

GBP/USD tested weekly highs earlier on Tuesday near 1.3585. It failed to break higher and lost momentum. Afterward a rally of the US dollar weakened the pair. Cable bottomed at 1.3505, the lowest since last Wednesday. It held on top of last week lows. In New York, it rebounded, finding resistance below 1.3540. 

The rally of the greenback took place on the back of rising US bond yields. Expectation about a rate hike from the Federal Reserve in March continued to rise. The 10-year yield jumped to 2.54%, the highest level since March. 

The pound was unaffected so far by the cabinet reshuffle in the UK that added more political pressure to PM May. On Wednesday, UK industrial production and trade balance data will be released. In the US, the next relevant report will be the December CPI on Thursday. 

Technical outlook and levels to watch 

“The pair is biased lower according to technical readings in the 4 hours chart, as the pair stands below is 20 SMA that anyway lacks directional strength, while technical indicators hold within bearish territory, the Momentum heading modestly lower and the RSI trying to stabilize around 45”, said Valeria Bednarik, Chief Analyst at FXStreet. 

According to her, the low posted last week at 1.3495 is the immediate support, with a break below it favoring a continued decline toward the 1.3410 price zone.