GBP/USD surrenders intraday gains, trades around 1.3900 ahead of US data

• GBP/USD witnessed some intraday selling near the 1.3930-35 region on Monday.
• A combination of factors extended some support and helped limit any further slide.
• Investors look forward to the BoE policy decision on Thursday for a fresh impetus.

The GBP/USD pair retreated nearly 50 pips from daily swing highs and dropped to three-day lows, around the 1.3885-80 region in the last hour, albeit lacked any follow-through selling.

The pair struggled to preserve its modest intraday gains, instead met with some fresh supply near the 1.3930-35 area and might now be looking to extend Friday's retracement slide from over one-month tops. The intraday pullback lacked any obvious fundamental catalyst and is more likely to remain limited, warranting some caution for bearish traders.

The British pound might continue to benefit from the optimism over the declining trend in new COVID-19 cases in the UK. Apart from this, the European Union's decision to pause legal proceedings against Britain over the Northern Ireland protocol dispute should further act as a tailwind for the sterling and lend some support to the GBP/USD pair.

Meanwhile, evidence of a more robust UK economic recovery now seemed to have fueled speculations that the Bank of England (BoE) could be among the first major central banks to begin the process of weaning its economy off stimulus support. Hence, the market focus will remain on the upcoming BoE monetary policy meeting scheduled on Thursday.

Conversely, growing market speculations that the Fed would retain its ultra-lose monetary policy stance for a longer period dragged the US dollar back closer to one-month lows touched last week. Apart from this, declining US Treasury bond yields and a generally positive tone around the equity markets further undermined the safe-haven greenback.

This might turn out to be another factor that should hold traders from placing any bearish bets around the GBP/USD pair and help limit the downside. Market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI. The data might influence the USD price dynamics and provide some impetus to the major.

Technical levels to watch