GBP/USD Pair Builds On Its Steady Intraday Recovery Amid BOE Intervention, A Slew Of U.S Data On Sight

• GBP/USD attracts some buying on Tuesday to extend the modest rebound from the vicinity of the 1.03582 level
• A fresh leg down in the U.S. Treasury Bond yields, which, along with a weaker risk tone, undermined the safe-haven greenback, exerts downward pressure on the pair
• British finance minister Kwasi Kwarteng scrapped the country's top rate of income tax and cancelled a planned rise in corporate taxes
• BOE intervention on Monday allows the quote to pare losses.
• New home sales data and U.S. Core Durable Goods order data report will be released today during the early North-American session.

GBP/USD pair witnessed heavy buying on Tuesday during the early part of the Asian session to extend the modest pullback from the record low touched earlier on Monday at the vicinity of 1.03582 level. The cross met fresh Demand from the vicinity of the 1.06473 level and lifted spot prices from the previous day's low. At the time of speaking, the pair is down 90 pips for the day and looks set to maintain its offered tone heading into the European session.

A fresh leg down in the U.S. Treasury Bond yields and a weaker risk tone undermined the safe-haven greenback and helped exert downward pressure on the GBP/USD pair. As such, the 2-year Treasury note yield was down more than 1 basis point to 4.306%, while the 10-year Treasury note has dipped more than 1 basis point to 3.878%. Markets continue to digest the impact of the Federal Reserve's most recent policy decisions after the central bank hiked interest rates by 75 basis points. Last week and suggested it would keep doing so throughout 2022 and 2023 to push back against surging inflation.

The U.S. Dollar index(DXY) measures the value of USD against a basket of currencies, weakened in early Asian trade on Tuesday and traded 0.3% lower to 113.673, falling back from the 20-year high of 114.285 touched on Monday. The USD pullback could be solely attributed to some profit-taking amid a solid recovery in the British pound and extremely overbought conditions.

The pound was pressured by the steady rise in the U.S. dollar before last week, partly because high energy prices were exaggerating the U.K.'s trade deficit, and the Fed's rate hikes were drawing cash toward the U.S. But the downward pull intensified after the administration of new Prime Minister Liz Truss rolled out plans to enact large-scale tax cuts in the face of an economic slowdown.

On Friday, British finance minister Kwasi Kwarteng scrapped the country's top income tax rate and cancelled a planned rise in corporate taxes - all on top of a hugely expensive plan to subsidize energy bills for households and businesses. Kwarteng went ahead on Sunday and said that he was focused on boosting longer-term growth, not on short-term market moves, when challenged over the sharp fall in sterling and bond prices following his first fiscal statement, reported Reuters. "As chancellor of the exchequer, I don't comment on market movements. I am focused on growing the economy and making sure that Britain is an attractive place to invest," he told the BBC, defending the fiscal expansion despite the risks it fuels inflation further, added Reuters.That caused a record stampede of U.K. government bonds, with investors anticipating it would add to the government's already sizable budget deficit. The step would also be at odds with the Bank of England's efforts to curb inflation by stimulating the economy, potentially forcing policymakers to raise interest rates even further. 

"The selloff that followed the release on Friday of the government's 'Growth Plan'-- a budget in all but name and the biggest tax giveaway in half a century -- showed few signs of abating as markets entered a new week, heaping pressure on Prime Minister Liz Truss's days-old administration," said Bloomberg. However, the slump in prices was too heavy, so the BOE intervened on Monday, which allowed the quote to pare losses. On Monday, the Bank of England Governor Andrew Bailey attempted to soothe markets by saying the bank won't hesitate to increase rates by as much as needed to rein in inflation. But the statement did little to bolster the currency, which slid afterwards. The comments quashed speculation that the Bank of England would enact an emergency rate hike to bolster the pound, with the bank saying it would take stock at its next scheduled meeting. Yet even if it had, analysts were dubious it would have had a major impact.

"The just-issued Bank of England(BOE) statement is well-crafted; however, given where the markets are, it may not prove sufficient to stabilize sentiment sustainably". Bloomberg and Financial Times Columnist Mohamed A. EL-Erian said on Monday." If this assessment is correct, look for the currency to weaken from 1.08 and markets to put more pressure on the BOE" he added. More so, the broad risk-aversion wave and the pessimism surrounding the U.K. economy, mainly due to the Russia-Ukraine woes and the BOE's late response to the jump in inflation, could keep the GBP/USD bears hopeful. Recently, U.K.'s Rightmove said, per Reuters, that Asking prices for British homes rose solidly this month. Last week's cut to property purchase tax announced by finance minister Kwasi Kwarteng could fuel Demand further.

As we advance, traders will look for cues from the release of the New home sales report for August, which is expected to show a decline in the number of new single-family homes that were sold in august to 575,000 homes against a prior figure of 511,000 homes that were sold in July. Market Investors will look for directional impetus from the release of the U.S. Core Durable Goods order data which is expected to decline by 1.1% against a decline of 0.1% reported earlier. The reports would influence the USD price dynamics and allow traders to grab some trading opportunities around the pair.

Technical Outlook: Four-Hour GBP/USD Price Chart

From a technical standstill using a four-hour price chart, the price has extended the modest rebound from the vicinity of the 1.06743 level touched on Monday overnight after a major correction earlier on after prices retraced from the 50% Fibonacci retracement level at the 1.08625 level. Some follow-through buying would lift spot prices to the immediate hurdle, which is the 50% and 61.8 Fibonacci retracement levels at 1.08625 and 1.09831, respectively. Sustained strength above the aforementioned barricade would be a fresh trigger for bulls to continue pushing up the price and pave the way for additional gains. The upside trajectory could then accelerate toward testing the lower boundary channel of the multi-week-old descending channel pattern.

The moving average convergence divergence (MACD) crossover at -0.0049 paints a bearish filter. The RSI(14) level at 35.9307 favors a downward trend despite flashing extreme oversold conditions during the last four days. On the other hand, the 20 and 50 Exponential Moving Average(EMA) crossover at the 1.15969 level further adds to the downside bias. 

On the flip side, if sellers resurface and spark a bearish turnaround, initial resistance comes in at 1.06023- 1.06775 levels. On further strength, the focus shifts lower toward the 1.0000 parity level.