GBP/USD eases from 1.3080 high, still near 4-week highs

• GBP/USD ticks down from 1.3080 but maintains its bullish trend.
• The pound remains unfazed by BoE and COVID-19 restrictions.
• The pair is testing 50% retracement of September's decline.

The pound has pulled back from day highs at 1.3082, although it remains strong trading at its highest levels since early September, after having rallied about 1.6% over the last four days. The cable opened the week on a weak tone, with the USD pushing higher on the back of the Chinese yuan’s depreciation, but it found support right above 1.3000 to resume its near-time bullish trend and approach 1.3100 area.

BoE and COVID-19 fail to dent sterling’s strength

Pound’s rally has been unfazed by the Bank of England, which asked commercial banks earlier today about their readiness to cope with negative interest rates. This has reactivated market speculation over a further interest rate cut in the next months although BoE Governor has pointed out that the Bank does not know yet how quickly they will be implemented.

Furthermore, the UK Government has introduced stricter COVID-19 measures across some Northern regions in an attempt to stem the second wave of coronavirus infections. The restrictions include shutting bars, gyms, casinos and bookmakers in areas with “very high” alert levels.

GBP/USD: Testing 50% Fibo retracement of September’s decline

From a technical point of view, the daily charts show the pair testing resistance level at the 50% retracement level of September’s decline, approximately at 1.3085. If the cable manages to break above that level, next potential targets might be at 1.3140 (September 7 low) and 1.3180 (61.8% Fibonacci retracement).

On the downside, 1.3000 (mid-September and early October highs) is holding pullbacks so far, with next potential support levels at 1.2920 (October 9 low) and 1.2895 (October 8 low).

GBP/USD technical levels