GBP/USD Analysis: Bulls seem unstoppable amid broad-based USD sell-off

• GBP/USD continued scaling higher amid the prevalent selling bias around the USD.
• Growth concerns, fiscal impasse, declining US bond yields undermined the buck.
• Extremely overstretched conditions on short-term charts warrant caution for bulls.

The GBP/USD pair pulled back a bit during the first half of the trading action on Thursday amid some intraday US dollar short-covering move. The early dip, however, turned out to be short-lived, instead caught some fresh bids near the 1.2945 region amid a broad-based USD selloff. A steep decline in the US Treasury bond yields, coupled with the impasse over the next round of the US fiscal stimulus kept a lid on the attempted rebound, rather prompted some aggressive selling around the USD. It is worth reporting that Congressional Republicans and Democrats are no closer to a deal just a day ahead of the expiry of the existing enhanced unemployment provisions.

This comes on the back of growing market worries that the resurgence of COVID-19 cases could undermine the US economic recovery. The concerns were further fueled by Thursday's advance US GDP report, which showed that the world's largest economy collapsed by a record 32.9% annualized pace during the second quarter of 2020. The bearish pressure around the USD aggravated further after the US President Donald Trump floated the idea to delay the 2020 election due to coronavirus. Meanwhile, the proposal was immediately rejected by Congress, albeit did little to provide any respite to the USD bulls. The pair rallied over 150 pips intraday and finally settled near daily tops.

The momentum extended through the Asian session on Friday and pushed the pair further beyond the 1.3100 round-figure mark, to the highest level since March 9. In the absence of any major market-moving economic releases from the UK, the USD price dynamics might continue to act as an exclusive driver of the pair's momentum. Meanwhile, the US economic docket features the release of Core PCE Price Index, Personal Income/Spending data, Chicago PMI and Revised Michigan Consumer Sentiment. The data will be looked upon for some meaningful trading opportunities later during the early North American session.

Short-term technical outlook

From a technical perspective, extremely overbought conditions on short-term charts might force traders to take some profits off the table heading the weekend. That said, the 1.3100 round-figure mark now seems to act as immediate support and is closely followed by the 1.3080-75 region. Sustained weakness below the mentioned support levels might trigger some follow-through technical selling and accelerate the corrective slide further towards the key 1.3000 psychological mark. Any subsequent fall might still be seen as a buying opportunity, which, in turn, should help limit the downside near the 1.2900-1.2890 support area.

On the upside, the next relevant target for the ongoing strong upward trajectory is pegged near the 1.3200 round-figure mark (March swing highs). Some follow-through buying has the potential to lift the pair further towards YTD tops, around the 1.3265 region before bulls eventually aim to reclaim the 1.3300 round-figure mark.